UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
OR
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 001-35914
MURPHY USA INC.INC.
(Exact name of registrant as specified in its charter)
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Delaware | 46-2279221 |
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Delaware | 46-2279221 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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200 Peach Street | |
El Dorado, Arkansas | Arkansas | 71730-5836 |
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(Address of principal executive offices) | (Zip Code) |
(870) 875-7600
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 Par Value | MUSA | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ ☑Yes __☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ☑ Yes __☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ ☑Accelerated filer __☐ Non-accelerated filer __ ☐Smaller reporting company __☐ Emerging growth company __☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. __☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐ Yes ☑ No
__Yes þ No
Number of shares of Common Stock, $0.01 par value, outstanding at September 30, 2017March 31, 2024 was 34,796,150.20,717,691.
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MURPHY USA INC. |
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TABLE OF CONTENTS |
ITEM 1. FINANCIAL STATEMENTS
Murphy USA Inc.
Consolidated Balance Sheets | | | September 30, | | December 31, |
(Thousands of dollars) | 2017 | | 2016 |
| (unaudited) | | |
| | March 31, | | | | March 31, | | December 31, |
(Millions of dollars, except share amounts) | | (Millions of dollars, except share amounts) | | 2024 | | 2023 |
| | (unaudited) | |
Assets | |
Assets | |
Assets | | | | | |
Current assets | | | | Current assets | | |
Cash and cash equivalents | $ | 169,014 |
| | $ | 153,813 |
|
Accounts receivable—trade, less allowance for doubtful accounts of $1,094 in 2017 and $1,891 in 2016 | 192,443 |
| | 183,519 |
|
Marketable securities, current | |
Accounts receivable—trade, less allowance for doubtful accounts of $1.3 at 2024 and 2023, respectively | |
Inventories, at lower of cost or market | 200,765 |
| | 153,351 |
|
Prepaid expenses and other current assets | 13,538 |
| | 24,871 |
|
| Total current assets | 575,760 |
| | 515,554 |
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Property, plant and equipment, at cost less accumulated depreciation and amortization of $846,212 in 2017 and $780,426 in 2016 | 1,659,410 |
| | 1,532,655 |
|
Total current assets | |
Total current assets | |
Marketable securities, non-current | |
Property, plant and equipment, at cost less accumulated depreciation and amortization of $1,784.2 and $1,739.2 at 2024 and 2023, respectively | |
| Operating lease right of use assets, net | |
Operating lease right of use assets, net | |
Operating lease right of use assets, net | |
Intangible assets, net of amortization | |
Goodwill | |
Other assets | 44,337 |
| | 40,531 |
|
| Total assets | $ | 2,279,507 |
| | $ | 2,088,740 |
|
Total assets | |
Total assets | |
| Liabilities and Stockholders' Equity | |
Liabilities and Stockholders' Equity | |
Liabilities and Stockholders' Equity | |
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Current liabilities | |
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| Current liabilities | | |
Current maturities of long-term debt | $ | 19,719 |
| | $ | 40,596 |
|
Trade accounts payable and accrued liabilities | 454,074 |
| | 473,370 |
|
Income taxes payable | 12,216 |
| | 594 |
|
| Total current liabilities | |
| Total current liabilities | |
| Total current liabilities | 486,009 |
| | 514,560 |
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Long-term debt, including capitalized lease obligations | 864,975 |
| | 629,622 |
|
Long-term debt, including capitalized lease obligations | |
Long-term debt, including capitalized lease obligations | |
Deferred income taxes | 222,085 |
| | 204,656 |
|
Asset retirement obligations | 27,489 |
| | 26,200 |
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Non-current operating lease liabilities | |
Deferred credits and other liabilities | 13,856 |
| | 16,626 |
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Total liabilities | 1,614,414 |
| | 1,391,664 |
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Stockholders' Equity | |
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| Stockholders' Equity | | |
Preferred Stock, par $0.01 (authorized 20,000,000 shares, | | | |
none outstanding) | — |
| | — |
|
Common Stock, par $0.01 (authorized 200,000,000 shares, | | | |
46,767,164 and 46,767,164 shares issued at | | | |
2017 and 2016, respectively) | 468 |
| | 468 |
|
Treasury stock (11,971,014 and 9,831,196 shares held at | | | |
September 30, 2017 and December 31, 2016, respectively) | (753,019 | ) | | (608,001 | ) |
Preferred Stock, par $0.01 (authorized 20,000,000 shares, none outstanding) | |
Common Stock, par $0.01 (authorized 200,000,000 shares, 46,767,164 shares issued at 2024 and 2023, respectively) | |
Treasury stock (26,049,473 and 25,929,836 shares held at 2024 and 2023, respectively) | |
Additional paid in capital (APIC) | 547,949 |
| | 555,338 |
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Retained earnings | 869,695 |
| | 749,271 |
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| Total stockholders' equity | |
Total stockholders' equity | |
Total stockholders' equity | 665,093 |
| | 697,076 |
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Total liabilities and stockholders' equity | $ | 2,279,507 |
| | $ | 2,088,740 |
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See notes to consolidated financial statements.
Murphy USA Inc.
Consolidated Statements of Income
(unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Thousands of dollars except per share amounts) | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | Three Months Ended March 31, |
(Millions of dollars, except share and per share amounts) | | (Millions of dollars, except share and per share amounts) | | | | | | 2024 | | 2023 |
Operating Revenues | | | | | | | |
Petroleum product sales (a) | $ | 2,580,985 |
| | $ | 2,394,951 |
| | $ | 7,550,958 |
| | $ | 6,654,970 |
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Petroleum product sales1 | |
Petroleum product sales1 | |
Petroleum product sales1 | |
Merchandise sales | 605,575 |
| | 598,968 |
| | 1,777,063 |
| | 1,750,162 |
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Other operating revenues | 49,791 |
| | 48,819 |
| | 119,008 |
| | 133,630 |
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Total operating revenues | 3,236,351 |
| | 3,042,738 |
| | 9,447,029 |
| | 8,538,762 |
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Operating Expenses | |
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Petroleum product cost of goods sold (a) | 2,419,124 |
| | 2,275,487 |
| | 7,161,632 |
| | 6,301,552 |
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Operating Expenses | |
Operating Expenses | |
Petroleum product cost of goods sold1 | |
Petroleum product cost of goods sold1 | |
Petroleum product cost of goods sold1 | |
Merchandise cost of goods sold | 507,921 |
| | 503,266 |
| | 1,492,861 |
| | 1,475,869 |
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Station and other operating expenses | 130,375 |
| | 127,991 |
| | 384,552 |
| | 369,910 |
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| Store and other operating expenses | |
Store and other operating expenses | |
Store and other operating expenses | |
Depreciation and amortization | 28,989 |
| | 25,576 |
| | 83,514 |
| | 72,747 |
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Selling, general and administrative | 31,535 |
| | 30,726 |
| | 101,128 |
| | 94,549 |
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Accretion of asset retirement obligations | 447 |
| | 411 |
| | 1,335 |
| | 1,236 |
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| Total operating expenses | |
Total operating expenses | |
Total operating expenses | 3,118,391 |
| | 2,963,457 |
| | 9,225,022 |
| | 8,315,863 |
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| Gain (loss) on sale of assets | (58 | ) | | (335 | ) | | (3,426 | ) | | 88,640 |
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Income from operations | 117,902 |
| | 78,946 |
| | 218,581 |
| | 311,539 |
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| Gain (loss) on sale of assets | |
| Gain (loss) on sale of assets | |
Income (loss) from operations | |
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Other income (expense) | |
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Interest income | 466 |
| | 144 |
| | 831 |
| | 474 |
|
Other income (expense) | |
Other income (expense) | |
Investment income | |
Investment income | |
Investment income | |
Interest expense | (12,726 | ) | | (10,182 | ) | | (33,868 | ) | | (29,780 | ) |
Other nonoperating income | 3,034 |
| | 2,848 |
| | 3,269 |
| | 2,966 |
|
| Other nonoperating income (expense) | |
Other nonoperating income (expense) | |
Other nonoperating income (expense) | |
Total other income (expense) | (9,226 | ) | | (7,190 | ) | | (29,768 | ) | | (26,340 | ) |
Income before income taxes | 108,676 |
| | 71,756 |
| | 188,813 |
| | 285,199 |
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Income tax expense | 40,789 |
| | 26,265 |
| | 68,389 |
| | 107,524 |
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Income tax expense (benefit) | |
| Net Income | |
| Net Income | |
| Net Income | $ | 67,887 |
| | $ | 45,491 |
| | $ | 120,424 |
| | $ | 177,675 |
|
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Basic and Diluted Earnings Per Common Share | | | | | | | |
Basic and Diluted Earnings Per Common Share | |
Basic and Diluted Earnings Per Common Share | |
Basic | |
Basic | |
Basic | $ | 1.92 |
| | $ | 1.17 |
| | $ | 3.32 |
| | $ | 4.47 |
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Diluted | 1.90 |
| | 1.16 |
| | $ | 3.29 |
| | $ | 4.44 |
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Weighted-Average Common Shares Outstanding (in thousands): | | | | | | | |
Basic | 35,423 |
| | 38,896 |
| | 36,253 |
| | 39,719 |
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Basic | |
Basic | |
Diluted | 35,745 |
| | 39,174 |
| | 36,579 |
| | 39,989 |
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Supplemental information: | | | | | | | |
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(a) Includes excise taxes of: | $ | 488,790 |
| | $ | 505,814 |
| | $ | 1,473,440 |
| | $ | 1,466,347 |
|
1Includes excise taxes of: | |
1Includes excise taxes of: | |
1Includes excise taxes of: | |
See notes to consolidated financial statements.
Murphy USA Inc.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
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(Millions of dollars) | | | | Three Months Ended March 31, |
| | | | | | 2024 | | 2023 |
Net income | | | | | | $ | 66.0 | | | $ | 106.3 | |
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Other comprehensive income (loss), net of tax | | | | | | | | |
Interest rate swap: | | | | | | | | |
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Reclassifications: | | | | | | | | |
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Amortization of unrealized (gain) loss to interest expense | | | | | | — | | | 0.2 | |
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Other comprehensive income (loss) | | | | | | — | | | 0.2 | |
Comprehensive income | | | | | | $ | 66.0 | | | $ | 106.5 | |
See notes to consolidated financial statements.
Murphy USA Inc.
Consolidated Statements of Cash Flows
(unaudited)
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(Millions of dollars) | | Three Months Ended March 31, |
| | 2024 | | 2023 |
Operating Activities | | | | |
Net income | | $ | 66.0 | | | $ | 106.3 | |
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities | | | | |
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Depreciation and amortization | | 58.7 | | | 56.4 | |
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Deferred and noncurrent income tax charges (benefits) | | (0.5) | | | 6.6 | |
Accretion of asset retirement obligations | | 0.8 | | | 0.8 | |
Amortization of discount on marketable securities | | (0.1) | | | — | |
(Gains) losses from sale of assets | | (0.4) | | | 0.2 | |
Net (increase) decrease in noncash operating working capital | | 4.2 | | | (30.4) | |
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Other operating activities - net | | 7.3 | | | 9.8 | |
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Net cash provided (required) by operating activities | | 136.0 | | | 149.7 | |
Investing Activities | | | | |
Property additions | | (76.2) | | | (72.7) | |
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Proceeds from sale of assets | | 1.0 | | | — | |
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Redemptions of marketable securities | | 1.0 | | | 4.5 | |
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Other investing activities - net | | (0.7) | | | (0.8) | |
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Net cash provided (required) by investing activities | | (74.9) | | | (69.0) | |
Financing Activities | | | | |
Purchase of treasury stock | | (86.4) | | | (13.7) | |
Dividends paid | | (8.8) | | | (8.1) | |
Borrowings of debt | | — | | | 8.0 | |
Repayments of debt | | (3.9) | | | (11.8) | |
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Amounts related to share-based compensation | | (23.1) | | | (13.5) | |
Net cash provided (required) by financing activities | | (122.2) | | | (39.1) | |
Net increase (decrease) in cash, cash equivalents, and restricted cash | | (61.1) | | | 41.6 | |
Cash, cash equivalents, and restricted cash at beginning of period | | 117.8 | | | 60.5 | |
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Cash, cash equivalents, and restricted cash at end of period | | $ | 56.7 | | | $ | 102.1 | |
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(Thousands of dollars) | Nine Months Ended September 30, |
| 2017 | | 2016 |
Operating Activities | | | |
Net income | $ | 120,424 |
| | $ | 177,675 |
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Adjustments to reconcile net income to net cash provided by operating activities | |
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Depreciation and amortization | 83,514 |
| | 72,747 |
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Deferred and noncurrent income tax charges | 17,429 |
| | 37,636 |
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Accretion of asset retirement obligations | 1,335 |
| | 1,236 |
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Pretax (gains) losses from sale of assets | 3,426 |
| | (88,640 | ) |
Net (increase) decrease in noncash operating working capital | (58,274 | ) | | 5,382 |
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Other operating activities - net | (1,488 | ) | | 3,792 |
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Net cash provided by operating activities | 166,366 |
| | 209,828 |
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Investing Activities | |
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Property additions | (201,532 | ) | | (198,911 | ) |
Proceeds from sale of assets | 689 |
| | 85,001 |
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Changes in restricted cash | — |
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| 68,571 |
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Other investing activities - net | (4,599 | ) | | (28,888 | ) |
Net cash required by investing activities | (205,442 | ) | | (74,227 | ) |
Financing Activities | |
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Purchase of treasury stock | (152,009 | ) | | (212,328 | ) |
Borrowings of debt | 338,750 |
| | 200,000 |
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Repayments of debt | (126,134 | ) | | (10,281 | ) |
Debt issuance costs | (1,100 | ) | | (3,240 | ) |
Amounts related to share-based compensation | (5,230 | ) | | (5,395 | ) |
Net cash provided by (required by) financing activities | 54,277 |
| | (31,244 | ) |
Net increase in cash and cash equivalents | 15,201 |
| | 104,357 |
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Cash and cash equivalents at January 1 | 153,813 |
| | 102,335 |
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Cash and cash equivalents at September 30 | $ | 169,014 |
| | $ | 206,692 |
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See notes to consolidated financial statements.
Murphy USA Inc.
Consolidated Statements of Changes in Equity
(unaudited)
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| Common Stock | | | | | | | | | | |
(Millions of dollars, except share amounts) | Shares | | Par | | Treasury Stock | | APIC | | Retained Earnings | | AOCI | | Total |
Balance as of December 31, 2022 | 46,767,164 | | | $ | 0.5 | | | $ | (2,633.3) | | | $ | 518.9 | | | $ | 2,755.1 | | | $ | (0.5) | | | $ | 640.7 | |
Net income | — | | | — | | | — | | | — | | | 106.3 | | | — | | | 106.3 | |
Gain on interest rate hedge and unrealized gain on marketable securities, net of tax | — | | | — | | | — | | | — | | | — | | | 0.2 | | | 0.2 | |
Cash dividends declared ($0.37 per share) | — | | | — | | | — | | | — | | | (8.1) | | | — | | | (8.1) | |
Dividend equivalent units accrued | — | | | — | | | — | | | 0.1 | | | (0.1) | | | — | | | — | |
Purchase of treasury stock | — | | | — | | | (13.7) | | | — | | | — | | | — | | | (13.7) | |
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Issuance of treasury stock | — | | | — | | | 8.7 | | | (8.7) | | | — | | | — | | | — | |
Amounts related to share-based compensation | — | | | — | | | — | | | (13.5) | | | — | | | — | | | (13.5) | |
Share-based compensation expense | — | | | — | | | — | | | 4.9 | | | — | | | — | | | 4.9 | |
Balance as of March 31, 2023 | 46,767,164 | | | $ | 0.5 | | | $ | (2,638.3) | | | $ | 501.7 | | | $ | 2,853.2 | | | $ | (0.3) | | | $ | 716.8 | |
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| Common Stock | | | | | | | | |
(Thousands of dollars, except share amounts) | Shares | | Par | | Treasury Stock | | APIC | | Retained Earnings | | Total |
Balance as of December 31, 2015 | 46,767,164 |
| | $ | 468 |
| | $ | (294,139 | ) | | $ | 558,182 |
| | $ | 527,779 |
| | $ | 792,290 |
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Net income | — |
| | — |
| | — |
| | — |
| | 177,675 |
| | 177,675 |
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Purchase of treasury stock | — |
| | — |
| | (212,328 | ) | | — |
| | — |
| | (212,328 | ) |
Issuance of treasury stock | — |
| | — |
| | 9,356 |
| | (9,356 | ) | | — |
| | — |
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Amounts related to share-based compensation | — |
| | — |
| | — |
| | (5,395 | ) | | — |
| | (5,395 | ) |
Share-based compensation expense | — |
| | — |
| | — |
| | 6,945 |
| | — |
| | 6,945 |
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Balance as of September 30, 2016 | 46,767,164 |
| | $ | 468 |
| | $ | (497,111 | ) | | $ | 550,376 |
| | $ | 705,454 |
| | $ | 759,187 |
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| Common Stock | | | | | | | | | | |
(Millions of dollars, except share amounts) | Shares | | Par | | Treasury Stock | | APIC | | Retained Earnings | | AOCI | | Total |
Balance as of December 31, 2023 | 46,767,164 | | | $ | 0.5 | | | $ | (2,957.8) | | | $ | 508.1 | | | $ | 3,278.1 | | | $ | — | | | $ | 828.9 | |
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Net income | — | | | — | | | — | | | — | | | 66.0 | | | — | | | 66.0 | |
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Cash dividends declared ($0.42 per share) | — | | | — | | | — | | | — | | | (8.8) | | | — | | | (8.8) | |
Dividend equivalent units accrued | — | | | — | | | — | | | 0.1 | | | (0.1) | | | — | | | — | |
Purchase of treasury stock | — | | | — | | | (86.9) | | | — | | | — | | | — | | | (86.9) | |
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Issuance of treasury stock | — | | | — | | | 11.0 | | | (11.1) | | | — | | | — | | | (0.1) | |
Amounts related to share-based compensation | — | | | — | | | — | | | (23.1) | | | — | | | — | | | (23.1) | |
Share-based compensation expense | — | | | — | | | — | | | 5.6 | | | — | | | — | | | 5.6 | |
Balance as of March 31, 2024 | 46,767,164 | | | $ | 0.5 | | | $ | (3,033.7) | | | $ | 479.6 | | | $ | 3,335.2 | | | $ | — | | | $ | 781.6 | |
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| Common Stock | | | | | | | | |
(Thousands of dollars, except share amounts) | Shares | | Par | | Treasury Stock | | APIC | | Retained Earnings | | Total |
Balance as of December 31, 2016 | 46,767,164 |
| | $ | 468 |
| | $ | (608,001 | ) | | $ | 555,338 |
| | $ | 749,271 |
| | $ | 697,076 |
|
Net income | — |
| | — |
| | — |
| | — |
| | 120,424 |
| | 120,424 |
|
Purchase of treasury stock | — |
| | — |
| | (152,009 | ) | | — |
| | — |
| | (152,009 | ) |
Issuance of treasury stock | — |
| | — |
| | 6,991 |
| | (6,880 | ) | | — |
| | 111 |
|
Amounts related to share-based compensation | — |
| | — |
| | — |
| | (5,230 | ) | | — |
| | (5,230 | ) |
Share-based compensation expense | — |
| | — |
| | — |
| | 4,721 |
| | — |
| | 4,721 |
|
Balance as of September 30, 2017 | 46,767,164 |
| | $ | 468 |
| | $ | (753,019 | ) | | $ | 547,949 |
| | $ | 869,695 |
| | $ | 665,093 |
|
See notes to consolidated financial statements.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note1 — Description of Business and Basis of Presentation
Description of business — Murphy USA Inc. and its consolidated subsidiaries (“Murphy USA”, "we", "our", "us" or the “Company”) markets refined products through a network of retail gasoline stationsstores and to unbranded wholesale customers. In addition, we operate non-fuel convenience stores in select markets. The Company owns and operates a chain of retail stores under the brand names of Murphy USA’s owned retail stationsUSA® and Murphy Express, most of which are almost all located in close proximity to Walmart stores, in 26 states and usealso has a mix of convenience stores with and without retail gasoline that operate under the brand name Murphy USA®of QuickChek®. Murphy USA also markets gasoline and other products at standalone stations underAt March 31, 2024, the Murphy Express brand. At September 30, 2017, Murphy USACompany had a total of 1,4231,733 Company stationsstores of which 1,1541,579 were branded as Murphy USA and 269154 were Murphy Express.the QuickChek brand. The Company also has certain product supply and wholesale assets, including product distribution terminals and pipeline positions.
Basis of Presentation — Murphy USA was incorporated in March 2013 and, in connection with its incorporation, Murphy USA issued 100 shares of common stock, par value $0.01 per share, to Murphy Oil Corporation (“Murphy Oil”) for $1.00. On August 30, 2013, Murphy USA was separated from Murphy Oil through the distribution of 100% of the common stock of Murphy USA to holders of Murphy Oil stock. Murphy USA Inc., Murphy Oil USA, Inc. and certain of its subsidiaries operate on a calendar year basis, while the QuickChek subsidiary uses a weekly retail calendar where each quarter has 13 weeks. For the three month period ended March 31, 2024, the QuickChek results cover the period December 30, 2023 to March 29, 2024 and for the three month period ended March 31, 2023, the QuickChek results cover the period December 31, 2022 to March 31, 2023. The difference in timing of the period ends is immaterial to the overall consolidated results.
In preparing the financial statements of Murphy USA in conformity with accounting principles generally accepted in the United States, management has made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates.
In 2017, we revised our historical presentation of gains and losses on asset disposals and retirements, which are shown in our Consolidated Statements of Income as gain (loss) on sale of assets. This line item is currently, and will be prospectively, presented as a component of income from operations. Our accounting policy has been updated to reflect this presentation.
Interim Financial Information — The interim period financial information presented in these consolidated financial statements is unaudited and includes all known accruals and adjustments, in the opinion of management, necessary for a fair presentation of the consolidated financial position of Murphy USA and its results of operations and cash flows for the periods presented. All such adjustments are of a normal and recurring nature.
These interim consolidated financial statements should be read together with our audited financial statements for the years ended December 31, 2016, 20152023, 2022 and 2014,2021, included in our Annual Report on Form 10-K (File No. 001-35914), as filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934 on February 22, 2017.16, 2024.
Recently Issued Accounting Standards—
In May 2014,December 2023, the FASB issued ASU No. 2014-09 "Revenue from Contracts with Customers" ("ASU 2014-09"), which supersedes the revenue recognition requirements2023-07, "Segment Reporting: Improvements to Reportable Segment Disclosures." The amendments in the Accounting Standards Codification ("Codification")this Update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities and clarifies that single reportable segment entities must apply Topic 605, Revenue Recognition, and industry-specific guidance throughout the Industry Topics of the Codification.280 in its entirety. The core principle of the new ASU 2014-09 isamendments in this Update for companies to recognize revenue from the transfer of goods or services to customers in amounts that reflect the consideration to whichannual disclosures were effective for the Company expects toon January 1, 2024, and the interim disclosures will be entitled in exchangeeffective for those goods or services. The Company will adopt ASU 2014-09the year beginning January 1, 2018 using2025, with early adoption permitted. The amendments will be applied retrospectively to all prior periods presented in the modified retrospective approach applied to those contracts that were not completed at that date. Prior periods will not be retrospectively adjusted.financial statement. The Company has completed its analysis to identify all revenue streams, and is currently determiningdetermined this will not have a material impact on the impact the ASU will have on these various revenue streams and theCompany's consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures." This ASU intends to enhance income tax disclosures, under Topic 740, to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The Company continues to evaluateamendments in this Update improve the impact to our consolidated financial statementstransparency of income tax disclosures by requiring (1) consistent categories and related disclosures. The Company isgreater disaggregation of information in the process of updating our existing controlsrate reconciliation and processes to comply(2) income taxes paid disaggregated by jurisdiction. The amendments in this Update are effective for the Company for the year beginning January 1, 2025, with the guidance.
early adoption permitted. The
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
amendments should be applied on a prospective basis, with retrospective application permitted. The Company currently presents excise taxhas determined this will not have a material impact on the Company's consolidated financial statements.
Note2 — Revenues
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our petroleum products, convenience merchandise, Renewable Identification Numbers ("RINs") and other similar taxes collected onassets to our third-party customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Excise and sales of refined products and remitted to governmental agencies on a gross basis, in both revenues and cost of petroleum products sold in the income statement. ASU 2014-09 requires the Company to either analyze each tax on a jurisdiction-by-jurisdiction basis to determine if it isthat we collect where we have determined we are the principal in the transaction and continue to present the tax on a gross basis or elect to report all taxes on a net basis. The Company expects to elect to assess all excise and other similar taxeshave been recorded as revenue on a jurisdiction-by-jurisdiction basis resulting in certain taxesbasis.
The Company enters into buy/sell and similar arrangements when petroleum products are held at one location but are needed at a different location. The Company often pays or receives funds related to be presentedthe buy/sell arrangements based on location or quality differences. The Company accounts for such transactions as non-monetary exchanges under existing accounting guidance and typically reports these on a net basis upon adoption of ASU 2014-09, thus reducing revenue in the income statement with no impact to net income or cash flows. Consolidated Statements of Income.
The Company does not expect the impact on reported revenuefollowing tables disaggregate our revenues by major source for the yearthree months ended DecemberMarch 31, 2018,2024 and 2023, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2024 | | Three Months Ended March 31, 2023 |
(Millions of dollars) | | Marketing | | Corporate and Other Assets | | Consolidated | | Marketing | | Corporate and Other Assets | | Consolidated |
Petroleum product sales (at retail) 1 | | $ | 3,427.6 | | | — | | | $ | 3,427.6 | | | $ | 3,586.1 | | | $ | — | | | $ | 3,586.1 | |
Petroleum product sales (at wholesale) 1 | | 384.1 | | | — | | | 384.1 | | | 408.1 | | | — | | | 408.1 | |
Total petroleum product sales | | 3,811.7 | | | — | | | 3,811.7 | | | 3,994.2 | | | — | | | 3,994.2 | |
Merchandise sales | | 1,000.7 | | | — | | | 1,000.7 | | | 966.2 | | | | | 966.2 | |
Other operating revenues: | | | | | | | | | | | | |
RINs | | 29.4 | | | — | | | 29.4 | | | 115.3 | | | | | 115.3 | |
Other revenues 2 | | 1.8 | | | 0.1 | | | 1.9 | | | 1.4 | | | 0.1 | | | 1.5 | |
Total revenues | | $ | 4,843.6 | | | $ | 0.1 | | | $ | 4,843.7 | | | $ | 5,077.1 | | | $ | 0.1 | | | $ | 5,077.2 | |
1 Includes excise and sales taxes that remain eligible for inclusion under Topic 606
2 Primarily includes collection allowance on excise and sales taxes combined with other miscellaneous items
Marketing segment
Petroleum product sales (at retail). For our retail store locations, the revenue related to petroleum product sales is recognized as the fuel is pumped to our customers. The transaction price at the pump typically includes some portion of sales or excise taxes as levied in the quarters therein,respective jurisdictions. Those taxes that are collected for remittance to be material.
In February 2016,governmental entities on a pass-through basis are not recognized as revenue and they are recorded to a liability account until they are paid. Our customers typically use a mixture of cash, checks, credit cards and debit cards to pay for our products as they are received. We have accounts receivable from the FASB issued ASU No. 2016-02, "Leases (Topic 842)" (“ASU 2016-02”). ASU 2016-02 amendsvarious credit/debit card providers at any point in time related to product sales made on credit cards and debit cards. These receivables are typically collected in two to seven days, depending on the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. Lessor accounting will remain similar to lessor accounting under previous GAAP, while aligningterms with the FASB’s new revenue recognition guidance. ASU 2016-02 is effective forparticular credit/debit card providers. Payment fees retained by the Company beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. While this ASU will have an impact on the Company's internal processescredit/debit card providers are recorded as Store and controls and result in a change to the Company's accounting, the Company is stillother operating expenses in the evaluation and information gathering stageConsolidated Statements of implementing the guidance and can not yet estimate the potential impact.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting", which amends the current stock compensation guidance. The amendments simplify the accounting for the taxes related to share-based payments, including adjustments to how excess tax benefits and a company’s payments for tax withholdings should be classified among other changes. The standard was effective for the Company on January 1, 2017.
The primary impact of adoption for the first nine months of 2017 was the recognition of $1.9 million of excess tax benefits in the provision for income taxes rather than paid-in-capital for the current period. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of January 1, 2017, where the cumulative effect of these changes is required to be recorded. The Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period.
The Company elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively as of January 1, 2017. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented on the consolidated statement of cash flows, as such cash flows have historically been presented as a financing activity.
Note2— Inventories
Inventories consisted of the following:Income.
8
|
| | | | | | | | |
(Thousands of dollars) | | September 30, 2017 | | December 31, 2016 |
Finished products - FIFO basis | | $ | 271,400 |
| | $ | 207,903 |
|
Less LIFO reserve - finished products | | (174,806 | ) | | (153,319 | ) |
Finished products - LIFO basis | | 96,594 |
| | 54,584 |
|
Store merchandise for resale | | 100,009 |
| | 95,649 |
|
Materials and supplies | | 4,162 |
| | 3,118 |
|
Total inventories | | $ | 200,765 |
| | $ | 153,351 |
|
At September 30, 2017 and December 31, 2016, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded the LIFO carrying value by $174.8 million and $153.3 million, respectively.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Petroleum product sales (at wholesale). Our sales of petroleum products at wholesale are generally recorded as revenue when the deliveries have occurred and legal ownership of the product has transferred to the customer. Title transfer for bulk refined product sales typically occurs at pipeline custody points and upon trucks loading at product terminals. For bulk pipeline sales, we record receivables from customers that are generally collected within a week from custody transfer date. For our rack product sales, the majority of our customers' accounts are drafted by us within 10 days from product transfer.
Merchandise sales. For our retail store locations, the revenue related to merchandise sales is recognized as the customer completes their purchase at our locations. The transaction price typically includes some portion of sales tax as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass-through basis are not recognized as revenue and they are recorded to a liability account until they are paid. As noted above, a mixture of payment types are used for these revenues and the same terms for credit/debit card receivables are realized.
With respect to merchandise sales revenue we must determine whether we are the principal or agent for some categories of merchandise such as scratch-off lottery tickets, lotto tickets, newspapers and other small categories of merchandise. For scratch-off lottery tickets, we have determined we are the principal in the majority of the jurisdictions and therefore we record those sales on a gross basis. We have some categories of merchandise (such as lotto tickets) where we are the agent and the revenues recorded for those transactions are our net commission only.
The Company offers loyalty programs through each of its branded retail locations. The customers earn rewards based on their spending or other promotional activities. These programs create a performance obligation which requires us to defer a portion of sales revenue to the loyalty program participants until they redeem their rewards. The rewards may be redeemed for free or discounted merchandise or cash discounts at all stores and on fuel purchases at Murphy branded stores. Earned rewards expire after an account is inactive for a period of 90 days at Murphy branded stores, while certain QuickChek rewards require use within the month. We recognize loyalty revenue when a customer redeems an earned reward. Deferred revenue associated with both rewards programs are included in Trade accounts payable and accrued liabilities in our Consolidated Balance Sheets. The deferred revenue balances at March 31, 2024 and December 31, 2023 were immaterial.
RINs sales. For the sale of RINs, we recognize revenue when the RIN is transferred to the counter-party and the sale is completed. Receivables from our counter-parties related to the RIN sales are typically collected within five days of the sale.
Other revenues. Items reported as other operating revenues include collection allowances for excise and sales tax and other miscellaneous items and are recognized as revenue when the transaction is completed.
Accounts receivable
Trade accounts receivable on the balance sheet represents both receivables related to contracts with customers and other trade receivables. At March 31, 2024 and December 31, 2023, we had $240.0 million and $178.2 million of receivables, respectively, related to contracts with customers recorded. All of the trade accounts receivable related to contracts with customers outstanding at the end of each period were collected during the succeeding quarter. These receivables were generally related to credit and debit card transactions along with short term bulk and wholesale sales to our customers, which have a very short settlement window.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note3— Inventories
Inventories consisted of the following: | | | | | | | | | | | | | | |
(Millions of dollars) | | March 31, 2024 | | December 31, 2023 |
Petroleum products - FIFO basis | | $ | 356.8 | | | $ | 331.2 | |
Store merchandise for resale - FIFO basis | | 198.0 | | | 209.1 | |
Less LIFO reserve | | (274.3) | | | (212.1) | |
Total petroleum products and store merchandise inventory | | 280.5 | | | 328.2 | |
Materials and supplies | | 12.2 | | | 13.0 | |
Total inventories | | $ | 292.7 | | | $ | 341.2 | |
At March 31, 2024 and December 31, 2023, the replacement cost (market value) of LIFO inventories exceeded the LIFO carrying value for petroleum products by $271.6 million and $209.7 million, respectively and store merchandise for resale by $2.7 million and $2.4 million, respectively.
Note 4 — Marketable Securities
The Company invests a portion of its excess operational cash in marketable securities. The goal of the Company's investment policy, in order of priority, are as follows: (1) preservation of principal, (2) maintaining a high degree of liquidity to meet cash flow requirements, and (3) deliver competitive returns subject to prevailing market conditions and the Company's stated objectives related to safety and liquidity. Nothing in the policy is intended to indicate that management must invest excess operational cash; it allows it to be subject to specific limitations.
Securities are generally required to have a final maturity of 24 months or less with a weighted average maturity for the portfolio of no longer than 12 months and must have an active secondary market. Investments may include U.S. Treasury bills, notes and bonds, U.S. Agency securities, repurchase agreements, certificates of deposit, institutional, government money market funds that maintain a stable $1.00 net asset value, domestic and foreign commercial paper, municipal securities, domestic and foreign debt issued by corporations or financial institutions with the primary objective of minimizing the potential risk of principal loss. The Company determines the classification of its marketable securities based on its investment strategy at the time of purchase. All marketable securities in the periods presented have been classified as available-for-sale.
The amortized cost and carrying value (fair value) of marketable securities and the balance sheet location at March 31, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
(Millions of dollars) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
Available-for-sale securities: | | | | | | | | |
| | | | | | | | |
Marketable securities current | | | | | | | | |
U.S. Government bonds | | $ | 3.0 | | | $ | — | | | — | | | $ | 3.0 | |
U.S. Corporate bonds | | 3.0 | | | — | | | — | | | 3.0 | |
| | | | | | | | |
Investment income receivable | | 0.1 | | | — | | | — | | | 0.1 | |
| | 6.1 | | | — | | | — | | | 6.1 | |
| | | | | | | | |
Marketable securities non-current | | | | | | | | |
U.S. Corporate bonds | | 3.0 | | | — | | | — | | | 3.0 | |
Non U.S. Corporate bonds | | 1.5 | | | — | | | — | | | 1.5 | |
| | 4.5 | | | — | | | — | | | 4.5 | |
| | | | | | | | |
Total marketable securities | | $ | 10.6 | | | $ | — | | | $ | — | | | $ | 10.6 | |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
(Millions of dollars) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
Available-for-sale securities: | | | | | | | | |
| | | | | | | | |
Marketable securities current | | | | | | | | |
U.S. Government bonds | | $ | 3.0 | | | $ | — | | | $ | — | | | $ | 3.0 | |
U.S. Corporate bonds | | 3.9 | | | — | | | — | | | 3.9 | |
| | | | | | | | |
Investment income receivable | | 0.2 | | | — | | | — | | | 0.2 | |
| | 7.1 | | | — | | | — | | | 7.1 | |
| | | | | | | | |
Marketable securities non-current | | | | | | | | |
U.S. Corporate bonds | | 2.9 | | | — | | | — | | | 2.9 | |
Non U.S. Corporate bonds | | 1.5 | | | — | | | — | | | 1.5 | |
| | 4.4 | | | — | | | — | | | 4.4 | |
| | | | | | | | |
Total marketable securities | | $ | 11.5 | | | $ | — | | | $ | — | | | $ | 11.5 | |
The amortized cost basis and fair value of the Company's available-for-sale marketable securities, excluding Investment income receivable, at March 31, 2024, by contractual maturity, are as follows:
| | | | | | | | | | | | | | |
(Millions of dollars) | | Amortized Cost | | Fair Value |
Less than 1 year | | $ | 10.5 | | | $ | 10.5 | |
| | | | |
| | | | |
| | | | |
There was no impairment on any available-for-sale marketable securities as of March 31, 2024 or December 31, 2023.
Note5 — Goodwill and Intangible Assets
The Company's goodwill is assigned to its Marketing segment and none of the goodwill is deductible for tax purposes.
| | | | | | | | | | | | | | |
(Millions of dollars) | | March 31, 2024 | | December 31, 2023 |
Goodwill | | $ | 328.0 | | | $ | 328.0 | |
| | | | |
| | | | |
We amortize intangible assets subject to amortization on a straight-line basis based on the period for which the economic benefits of the asset or liability are expected to be realized. The intangible assets subject to amortization includes pipeline space, which is being amortized over a 40-year life, and the intangible lease liability acquired from QuickChek that is being amortized over the remaining life of the underlying leases.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Intangible assets subject to amortization at March 31, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remaining Useful Life (in years) | | March 31, 2024 | | December 31, 2023 |
(Millions of dollars) | | | Cost | | Net | | Cost | | Net |
Intangible assets subject to amortization: | | | | | | | | | |
Pipeline space | 31.4 | | $ | 39.6 | | | $ | 31.4 | | | $ | 39.6 | | | $ | 31.7 | |
Intangible lease liability | 10.2 | | (9.1) | | | (7.1) | | | (9.1) | | | (7.3) | |
Total intangible assets subject to amortization | | | 30.5 | | | 24.3 | | | 30.5 | | | 24.4 | |
Intangible assets not subject to amortization, indefinite lives: | | | | | | | | | |
Trade name | | | 115.4 | | | 115.4 | | | 115.4 | | | 115.4 | |
| | | | | | | | | |
| | | | | | | | | |
Intangible assets, net of amortization | | | $ | 145.9 | | | $ | 139.7 | | | $ | 145.9 | | | $ | 139.8 | |
Note6— Long-Term Debt
Long-term debt consisted of the following: | | | | | | | | | | | | | | |
(Millions of dollars) | | March 31, 2024 | | December 31, 2023 |
5.625% senior notes due 2027 (net of unamortized discount of $1.2 at March 31, 2024 and $1.3 at December 31, 2023) | | $ | 298.8 | | | $ | 298.7 | |
4.75% senior notes due 2029 (net of unamortized discount of $3.4 at March 31, 2024 and $3.6 at December 31, 2023) | | 496.6 | | | 496.4 | |
| | | | |
3.75% senior notes due 2031 (net of unamortized discount of $4.3 at March 31, 2024 and $4.4 at December 31, 2023) | | 495.7 | | | 495.6 | |
Term loan due 2028 (effective interest rate of 7.21% at March 31, 2024 and 7.23% at December 31, 2023 and net of unamortized discount of $0.5 at March 31, 2024 and $0.6 at December 31, 2023) | | 388.5 | | | 389.4 | |
Capitalized lease obligations, autos and equipment, due through 2026 | | 3.7 | | | 3.1 | |
Capitalized lease obligations, buildings, due through 2059 | | 121.8 | | | 123.6 | |
Unamortized debt issuance costs | | (6.7) | | | (7.1) | |
Total long-term debt | | 1,798.4 | | | 1,799.7 | |
Less current maturities | | 15.3 | | | 15.0 | |
Total long-term debt, net of current | | $ | 1,783.1 | | | $ | 1,784.7 | |
|
| | | | | | | | |
(Thousands of dollars) | | September 30, 2017 | | December 31, 2016 |
6% senior notes due 2023 (net of unamortized discount of $5,174 at September 30, 2017 and $5,826 at December 2016) | | $ | 494,826 |
| | $ | 494,174 |
|
5.625% senior notes due 2027 (net of unamortized discount of $3,589 at September 30, 2017) | | 296,411 |
| | — |
|
Term loan due 2020 (effective rate of 3.86% at September 30, 2017) | | 97,000 |
| | 180,000 |
|
Capitalized lease obligations, vehicles, due through 2021 | | 1,959 |
| | 1,451 |
|
Less unamortized debt issuance costs | | (5,502 | ) | | (5,407 | ) |
Total long-term debt | | 884,694 |
| | 670,218 |
|
Less current maturities | | 19,719 |
| | 40,596 |
|
Total long-term debt, net of current | | $ | 864,975 |
| | $ | 629,622 |
|
Senior Notes
On August 14, 2013,April 25, 2017, Murphy Oil USA, Inc. ("MOUSA"), our primary operating subsidiary, issued 6.00%$300 million of 5.625% Senior Notes due 20232027 (the “2023"2027 Senior Notes”Notes") in an aggregate principal amount of $500 million.under its existing shelf registration statement. The 20232027 Senior Notes are fully and unconditionally guaranteed by Murphy USA,the Company and are guaranteed by certain 100% ownedthe Company's subsidiaries that guarantee our credit facilities.Credit Facilities (as defined below). The indenture governing the 20232027 Senior Notes contains restrictive covenants that limit, among other things, the ability of Murphy USA, Murphy Oil USA, Inc.the Company, MOUSA, and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities.
On April 25, 2017, Murphy Oil USA, Inc.,September 13, 2019, MOUSA, issued $300$500 million of 5.625%4.75% Senior Notes due 20272029 (the "2027“2029 Senior Notes"Notes”) under its existing shelf registration statement.. The 2027net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of a prior note issuance. The 2029 Senior Notes are fully and unconditionally guaranteed by Murphy USA,the Company and are guaranteed by certain 100% ownedthe Company's subsidiaries that guarantee our credit facilities.Credit Facilities. The indenture governing the 2027
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2029 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 20232027 Senior Notes.
The 2023On January 29, 2021, MOUSA, issued $500 million of 3.75% Senior Notes due 2031 (the "2031 Senior Notes" and, together with the 2027 Senior Notes and the 2029 Senior Notes, the "Senior Notes"). The net proceeds from the issuance of the 2031 Senior Notes were used, in part, to fund the acquisition of QuickChek and other obligations related to that transaction. The 2031 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities. The indenture governing the 2031 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2027 and 2029 Senior Notes.
The Senior Notes and related guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the credit facilities)Credit Facilities) to the extent of the value of the assets securing such indebtedness. The 2023 and 2027 Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes.
Revolving Credit FacilitiesFacility and Term Loan
In March 2016, we amendedOur credit agreement consists of both a cash flow revolving credit facility and extended our existing credit agreement. a senior secured term loan.
The credit agreement provides for a committed $450 million asset-based loan (ABL) facility (with availability subject to the borrowing base described below) and a $200 millionsenior secured term loan facility. It also provides for a $150in an aggregate principal amount of $400 millionuncommitted incremental facility. On March 10, 2016,Murphy Oil USA, Inc. (the "Term Facility") (which was borrowed $200 in full on January 29, 2021) and revolving credit commitments in an aggregate amount equal to $350 million under (the "Revolving Facility", and together with the Term Facility, the "Credit Facilities"). The outstanding balance of the term loan facility that has a four-year term. was $389 million at March 31, 2024 and $390 million at December 31, 2023. The term loan is due January 2028, and we are required to make quarterly principal payments of $1 million, which began on July 1, 2021. As of September 30, 2017,March 31, 2024, we have zerohad no outstanding borrowings under our ABL facility.
The borrowing base is, at any timethe Revolving Facility and had $6.2 million in outstanding letters of determination,credit (which reduces the amount (net of reserves) equalavailable to the sum of:
• 100% of eligible cash at such time, plus
• 90% of eligible credit card receivables at such time, plus
• 90% of eligible investment grade accounts, plus
• 85% of eligible other accounts, plus
• 80% of eligible product supply/wholesale refined products inventory at such time, plus
• 75% of eligible retail refined products inventory at such time, plus
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the lesser of (i) 70% of the average cost of eligible retail merchandise inventory at such time and (ii) 85% of the net orderly liquidation value of eligible retail merchandise inventory at such time.
The ABL facility includes a $200 million sublimit for the issuance of letters of credit. Letters of credit issuedborrow under the ABL facility reduce availability under the ABL facility.Revolving Facility).
Interest payable on the credit facilitiesTerm Facility is based on either:
•the London interbank offeredterm overnight financing rate, adjusted for statutory reserve requirementsplus the applicable Alternative Reference Rate Committee ("ARRC") recommended credit spread adjustment (the “Adjusted LIBOTerm SOFR Rate”);
or
•the Alternate Base Rate, which is defined as the highest of (a) the prime rate of interest last quoted by The Wall Street Journal as the "Prime Rate", (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBOTerm SOFR Rate plus 1.00% per annum,
plus, (A) in the case of Adjusted LIBOTerm SOFR Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 1.50% to 2.00%a spread of 1.75% per annum dependingand (B) in the case of Alternate Base Rate borrowings, a spread of 0.75% per annum.
Interest payable on a total debt to EBITDA ratio under the ABL facility or (ii) with respect to Revolving Facility is based on either:
•the term loan facility, spreads rangingsecured overnight financing rate, plus 0.10% credit spread adjustment for all interest periods (the "Adjusted SOFR Rate"), which is subject to a 0.0% floor;
or
•the Alternate Base Rate, which is defined as the highest of (a) the rate of interest last quoted by The Wall Street Journal as the "Prime Rate", (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from 2.50%time to 2.75%time plus 0.50% per annum and (c) the one-month Adjusted SOFR Rate plus 1.00% per annum,
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
plus, (A) in the case of Adjusted SOFR Rate borrowings, a spread of 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio and (B) in the case of Alternate Base Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 0.50%0.75% to 1.00% per annum depending on total debt to EBITDA ratio or (ii) with respect to the term loan facility, spreads ranging from 1.50% to 1.75%1.25% per annum depending on a total debt to EBITDA ratio.
The interest rate period with respect to the Adjusted LIBO Rate interest rate option can be set at one, two, three, or six months as selected by usTerm Facility amortizes in accordance with the terms of the credit agreement.
We were obligated to make quarterly amortization payments on the outstanding principal amount of the term loan facility beginninginstallments, which commenced on July 1, 2016 equal to 5%2021, at a rate of the aggregate principal amount of term loans made on March 10, 2016, with the remaining balance payable on the scheduled maturity date of the term loan facility. Borrowings under the credit facilities are prepayable at our option without premium or penalty. We are1.00% per annum. Murphy USA is also required to prepay the term loan facilityTerm Facility with a portion of its excess cash flow, a portion of the net cash proceeds of certain asset sales orand casualty events subject(subject to certain exceptions.reinvestment rights) and the net cash proceeds of issuances of indebtedness not permitted under the Credit Agreement. The credit agreement also includes certain customary mandatory prepayment provisionsallows Murphy USA to prepay, in whole or in part, the Term Facility outstanding thereunder, together with respect to the ABL facility.any accrued and unpaid interest, with prior notice but without premium or penalty other than breakage and redeployment costs.
The credit agreement contains certain covenants that limit, among other things, the ability of usthe Company and ourcertain of its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes. In addition, theThe Revolving Facility credit agreement requires usalso impose total leverage ratio and secured net leverage ratio financial maintenance covenants which are tested quarterly. Pursuant to the total leverage ratio financial maintenance covenant, the Company must maintain a minimum fixed charge coveragetotal leverage ratio of 1.0not more than 5.0 to 1.0 when availability for at least three consecutive business days is less than the greater of (a) 17.5% of the lesser of the aggregate ABL facility commitmentswith an ability in certain circumstances to temporarily increase that limit to 5.5 to 1.0 and the borrowing base and (b) $70,000,000 (including as of the most recent fiscal quarter end on the first date when availability is less than such amount), as well as a maximum secured total debt to EBITDAnet leverage ratio of 4.5not more than 3.75 to 1.0 at any time when term facility commitments or term loans are outstanding. As of September 30, 2017, our fixed charge coverage ratio was 0.63; however, we had more than $100 million of availability under the ABL facility atwith an ability in certain circumstances to temporarily increase that date so the fixed charge coverage ratio currently has no impact on our operations or liquidity. Our secured debtlimit to EBITDA ratio as of September 30, 2017 was 0.234.25 to 1.0. The Credit Agreement also contains customary events of default.
ThePursuant to the credit agreement contains restrictions onagreement's covenant limiting certain restricted payments, certain payments in respect of our equity interests, including dividends, when availability under the credit agreement is less than or equal to the greater of $100 millionand 25% of the lesser of the revolving commitments and the borrowing base and our fixed charge coveragetotal leverage ratio, is less than 1.0 to 1.0 (unless availability under the credit agreementcalculated on a pro forma basis, is greater than $100 million and 40% of the lesser of the revolving commitments and the borrowing base). As of September 30, 2017,3.0 to 1.0 could be limited. At March 31, 2024, our total leverage ratio was 1.76 to 1.0 which meant our ability at that date to make restricted payments was not limited. If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited as our availability underby the borrowing base was more than $100covenant, which contains certain exceptions, including an ability to make restricted payments in cash in an aggregate amount not to exceed the greater of $113.6 million while our fixed charge coverage ratio under ouror 4.50% of consolidated net tangible assets over the life of the credit agreement was less than 1.0 to 1.0. As of December 31, 2016, we had a shortfall of approximately $304.1 million of our net income and retained earnings subject to such restrictions before the fixed charge coverage ratio under our credit agreement would exceed 1.0 to 1.0.agreement.
All obligations under the credit agreement are guaranteed by Murphy USA and the subsidiary guarantors party thereto, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by certain assets of Murphy USA, Murphy Oil USA, Inc. and the guarantors party thereto. to the guarantee and collateral agreement in respect thereof.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note47 — Asset Retirement Obligations (ARO)
The majority of the ARO recognized by the Company at September 30, 2017March 31, 2024 and December 31, 20162023 is related to the estimated costs to dismantle and abandon certain of its retail gasoline stations.stores. The Company has not recorded an ARO for certain of its marketing assets because sufficient information is presently not available to estimate a range of potential settlement dates for the obligation. These assets are consistently being upgraded and are expected to be operational into the foreseeable future. In these cases, the obligation will be initially recognized in the period in which sufficient information exists to estimate the obligation.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A reconciliation of the beginning and ending aggregate carrying amount of the ARO is shown in the following table.
|
| | | | | | | | |
(Thousands of dollars) | | September 30, 2017 | | December 31, 2016 |
Balance at beginning of period | | $ | 26,200 |
| | $ | 24,345 |
|
Accretion expense | | 1,335 |
| | 1,650 |
|
Liabilities incurred | | 230 |
| | 379 |
|
Settlement of liabilities | | $ | (276 | ) | | $ | (174 | ) |
Balance at end of period | | $ | 27,489 |
| | $ | 26,200 |
|
| | | | | | | | | | | | | | |
(Millions of dollars) | | March 31, 2024 | | December 31, 2023 |
Balance at beginning of period | | $ | 46.1 | | | $ | 43.3 | |
| | | | |
Accretion expense | | 0.8 | | | 3.0 | |
Settlements of liabilities | | (1.3) | | | (3.1) | |
Liabilities incurred | | 0.2 | | | 2.9 | |
Balance at end of period | | $ | 45.8 | | | $ | 46.1 | |
The estimation of future ARO is based on a number of assumptions requiring professional judgment. The Company cannot predict the type of revisions to these assumptions that may be required in future periods due to the lack of availability of additional information.
Note5—8 — Income Taxes
The effective tax rate is calculated as the amount of income tax expense (benefit) divided by income before income tax expense (benefit). For the three months ended March 31, 2024 and nine month periods ended September 30, 2017 and 2016,2023, the Company’s approximate effective tax rates were as follows:
| | | | | | | | | | | | | | |
| | 2024 | | 2023 |
Three Months Ended March 31, | | 19.4% | | 23.5% |
| | | | |
|
| | | | |
| | 2017 | | 2016 |
Three months ended September 30, | | 37.5% | | 36.6% |
Nine months ended September 30, | | 36.2% | | 37.7% |
In the three months ended March 31, 2024, the Company recognized approximately $4.2 million of excess tax benefits related to stock compensation for employees and $0.1 million in other discrete tax benefits. For the three months ended March 31, 2023, the Company recognized approximately $2.1 million of excess tax benefits related to stock compensation for employees and $0.2 million in other discrete tax benefits.
The effective tax rate for the three and nine months ended September 30, 2017 and 2016 was higher than the U.S. Federal tax rate of 35% but is in line with our estimated effective tax rate of 38% for the remainder of the year.
The Company was included in Murphy Oil’s tax returns for the periods prior to the separation. The statute of several jurisdictions remains subject to audit by taxing authorities. As of September 30, 2017,March 31, 2024, the earliest year remaining open for Federal examinationaudits and/or settlement is 20142020 and for the states it ranges from 2009-2012. In addition to the pre-separation returns being open under statute, the federal and state tax returns post separation are also open under statute for examination.audits and/or settlement is 2019. Although the Company believes that recorded liabilities for uncertain tax positionsunsettled issues are adequate, additional gains or losses could occur in future periods from resolution of outstanding unsettled matters.
We adopted ASU 2016-09 on January 1, 2017, which requires the excess tax benefits or deficiencies to be reflected in the Consolidated Statements of Income as a component of the provision for income taxes whereas they previously were recognized in paid-in-capital. Total excess tax benefits recognized in the three and nine months ended September 30, 2017 was $0.0 million and $1.9 million, respectively.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note69 — Incentive Plans
2013 Long-Term Incentive Plan
Effective August 30, 2013, certain of our employees participate in the Murphy USA 2013 Long-Term Incentive Plan which was subsequently amended and restated effective as of February 8, 2017 (the “MUSA 2013 Plan”). Equity Awards
The MUSA 2013 Plan authorizesauthorized the Executive Compensation Committee of our Board of Directors (“the Committee”) to grant non-qualified or incentive stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards), dividend equivalent units, cash awards, and performance awards to our employees. No more than 5.5 million shares of MUSA common stock may be delivered under the MUSA 2013 Plan and no more than 1 million shares of common stock may be awarded to any one employee, subject to adjustment for changes in capitalization. The maximum cash amount payable pursuant to any “performance-based” award to any participant in any calendar year is $5$5.0 million.
On FebruaryMay 4, 2023, the 2023 Omnibus Incentive Compensation Plan (the "MUSA 2023 Plan") was approved by the Company's shareholders and became effective for all future grants for both employees and directors. The MUSA 2023 Plan replaced the MUSA 2013 Plan and the 2013 Directors Plan, each of which expired on August 8, 2017,2023. The MUSA 2023 Plan authorizes the Executive Compensation Committee grantedof our Board of Directors (“the Committee”) to grant to non-employee directors, employees, and consultants of the Company, or any of its subsidiaries, stock options (incentive stock options ("ISOs") and nonqualified stock options ("NQSO")), stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance awards or other cash-based awards and other stock-based awards. The maximum number of shares available for 114,800 shares at an exercise price of $65.75 per shareissuance under the MUSA 2023 Plan shall not exceed in the aggregate 1.725 million shares (subject to certain adjustments).
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Beginning with its initial quarterly dividend in December 2020, the Company issued dividend equivalent units ("DEUs") on all outstanding, unvested equity awards (except stock options) in an amount commensurate with regular quarterly dividends paid on common stock. The terms of the MUSA 2013 Plan.DEUs mirror the underlying awards and will only vest if the related award vests. DEUs issued are included with grants in each respective table as applicable.
STOCK OPTIONS – The Committee fixes the option price of each option granted at no less than fair market value ("FMV") on the date of the grant and fixes the option term at no more than 7 years from such date. Most of the nonqualified stock options granted in 2024 to certain employees by the Committee were granted in February 2024. The Black-Scholes valuation for these awards is $15.45was $133.91 per option.
| | | | | | | | |
Assumptions used to value awards: | | |
Dividend yield | | 0.42 | % |
Expected volatility | | 32.9 | % |
Risk-free interest rate | | 4.3 | % |
Expected life (years) | | 4.8 |
Stock price at valuation date | | $ | 391.54 |
Changes in options outstanding for Company employees during the period from December 31, 2023 to March 31, 2024 are presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | |
Options | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value (Millions of Dollars) |
Outstanding at December 31, 2023 | 291,050 | | | $ | 139.07 | | | | | |
Granted | 33,010 | | | $ | 393.03 | | | | | |
Exercised | (19,100) | | | $ | 92.53 | | | | | |
| | | | | | | |
Outstanding at March 31, 2024 | 304,960 | | | $ | 169.48 | | | 4.1 | | $ | 76.2 | |
| | | | | | | |
Exercisable at March 31, 2024 | 205,825 | | | $ | 114.62 | | | 3.2 | | $ | 62.7 | |
RESTRICTED STOCK UNITS – The Committee also awardedhas granted time-based restricted stock units ("RSUs") as part of the compensation plan for its executives and performance-based restrictedcertain other employees since its inception. The awards granted in the current year were under the MUSA 2023 Plan, are valued at the grant date fair value, and vest over three years. The Committee has also granted time based RSUs to the non-employee directors of the Company as part of their overall compensation package for being a member of the Board of Directors, these awards vest at the end of one year. For annual equity grants to non-employee directors, the directors may elect to defer receipt of their vested RSUs until their service ends. These RSUs are included in the RSU table below, will vest in one year, and will thereafter become deferred stock units (performance units)units.
Changes in RSUs outstanding during the period from December 31, 2023 to certain employeesMarch 31, 2024 are presented in the following table:
| | | | | | | | | | | | | | | | | |
RSUs | Number of units | | Weighted Average Grant Date Fair Value | | Total Fair Value (Millions of Dollars) |
Outstanding at December 31, 2023 | 120,800 | | | $ | 188.37 | | | |
Granted | 15,345 | | | $ | 392.96 | | | |
Vested and issued | (47,305) | | | $ | 133.44 | | | $ | 19.2 | |
Forfeited | (1,349) | | | $ | 221.17 | | | |
Outstanding at March 31, 2024 | 87,491 | | | $ | 253.19 | | | $ | 36.7 | |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
DIRECTOR DEFERRED STOCK UNITS (MUSA 2023 Plan) — Non-employee directors can elect to receive their annual cash retainers in the form of DSUs. The DSUs are recognized at their fair value on the same date. Theredate of the grant. Director fees which are deferred into DSUs are calculated and expensed each quarter by taking fees earned during the quarter and dividing by the closing price of our common stock on the last trading day of the quarter. Each DSU represents the right to receive one share of common stock following the completion of a director's service. During the period ended March 31, 2024, we granted 206 DSUs and recorded director expense of $0.1 million related to the grants. At March 31, 2024, there were 29,075 time-based restricted units granted at1,209 Director DSUs vested and outstanding with an average grant date fair value of $65.41 along with 53,800 performance units.$349.46 under the MUSA 2023 Plan.
PERFORMANCE-BASED RESTRICTED STOCK UNITS – The Committee has granted performance-based restricted stock units (performance units or "PSUs") to its executives and certain other employees. In February 2024, the Committee awarded PSUs to certain employees. Half of the performance unitsPSUs vest based on a 3-yearthree-year return on average capital employed (ROACE)("ROACE") calculation and the other half vest based on a 3-yearthree-year total shareholder return (TSR)("TSR") calculation that compares MUSA to a group of 1617 peer companies. The portion of the awards that vest based on TSR qualify as a market condition and must be valued using a Monte Carlo valuation model. For the TSR portion of the awards, the fair value was determined to be $94.51$569.58 per unit. For the ROACE portion of the awards, the valuation will bewas based on the grant date fair value of $65.75$391.54 per unit and the number of awards will be periodically assessed to determine the probability of vesting.
On February 8, 2017,Changes in PSUs outstanding for Company employees during the Committee also granted 50,075 time-based restricted stock units grantedperiod from December 31, 2023 to certain employees with a grant date fair value of $65.75 per unit. March 31, 2024 are presented in the following table:
| | | | | | | | | | | | | | | | | |
Employee PSUs | Number of Units | | Weighted Average Grant Date Fair Value | | Total Fair Value (Millions of Dollars) |
Outstanding at December 31, 2023 | 95,582 | | | $ | 212.38 | | | |
Granted | 60,431 | | | $ | 482.74 | | | |
Vested and issued | (76,672) | | | $ | 148.38 | | | $ | 30.0 | |
| | | | | |
Outstanding at March 31, 2024 | 79,341 | | | $ | 318.45 | | | $ | 33.3 | |
2013 Stock Plan for Non-employee Directors
Effective August 8, 2013, Murphy USA adopted the 2013 Murphy USA Stock Plan for Non-employee Directors (the “Directors“2013 Directors Plan”). The directors for Murphy USA are compensated with a mixture of cash payments and equity-based awards. Awards under the 2013 Directors Plan may be in the form of restricted stock, restricted stock units, dividend equivalent units, stock options, or a combination thereof. An aggregate of 500,0000.5 million shares of common stock shall be availablewas reserved for issuance of grants under the Directors Plan.
DuringRESTRICTED STOCK UNITS (2013 Directors Plan) – The Committee has also granted time based RSUs to the first quarternon-employee directors of 2017, the Company issued 15,948 restricted stock unitsas part of their overall compensation package for being a member of the Board of Directors. Awards prior to its2023 vest at the end of three years and those granted in 2023 vested at the end of one year.
Changes in Director RSUs outstanding for Company non-employee directors atduring the period from December 31, 2023 to March 31, 2024 are presented in the following table:
| | | | | | | | | | | | | | | | | |
2013 Plan — Director RSUs | Number of Units | | Weighted Average Grant Date Fair Value | | Total Fair Value (Millions of Dollars) |
Outstanding at December 31, 2023 | 23,654 | | | $ | 180.97 | | | |
Granted | 10 | | | $ | 411.81 | | | |
Vested and issued | (13,461) | | | $ | 170.52 | | | $ | 5.3 | |
| | | | | |
| | | | | |
Outstanding at March 31, 2024 | 10,203 | | | $ | 194.78 | | | $ | 4.3 | |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
DEFERRED STOCK UNITS (2013 Directors Plan) — Effective January 1, 2023, non-employee directors could elect to receive their annual cash retainers in the form of Deferred Stock Units ("DSUs"). Each DSU represents the right to receive one share of common stock following the completion of a weighteddirector's service. Two DEU shares were granted and vested on the DSUs during the quarter. At March 31, 2024 there were 425 Director DSUs outstanding with an average grant date fair value of $66.01 per share. These shares vest in$258.35 under the 2013 Plan.
Share-based compensation for the three years from the grant date.
For the nine months ended September 30, 2017March 31, 2024 and 2016, share based compensation2023, was $4.7$5.6 million and $6.9$4.9 million, respectively. TheThere were $0.5 million in income tax benefitbenefits realized for the tax deductions from options exercised for the ninethree months ended September 30, 2017March 31, 2024 and 2016 was $0.2there were $0.1 million and $1.7 million, respectively.
Adoption of ASU 2016-09
On January 1, 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amended the current stock compensation guidance. As part of the adoption of this standard, the Company determined to leave its policy related to accounting for forfeitures based on estimates rather than changing to actual forfeitures. See Note 1 "Description of Business and Basis of Presentation" for information regarding the impact of adopting this standard for the Company.three months ended March 31, 2023.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7—10 — Financial Instruments and Risk Management
DERIVATIVE INSTRUMENTS — The Company makes limited use of derivative instruments to manage certain risks related to commodity prices.prices and interest rates. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by the Company’s senior management. The Company does not hold any derivatives for speculative purposes, and it does not use derivatives with leveraged or complex features. Derivative instruments are traded primarily with creditworthycredit worthy major financial institutions or over national exchanges such as the New York Mercantile Exchange (“NYMEX”). For accounting purposes, the Company has not designated commodity derivative contracts as hedges, and therefore, it recognizes all gains and losses on these derivative contracts in its Consolidated Statements of Income. Certain interest rate derivative contracts were accounted for as hedges and gain or loss associated with recording the fair value of these contracts was deferred in AOCI until the anticipated transactions occurred.As of September 30, 2017,March 31, 2024, all current commodity derivative activity is immaterial.
At September 30, 2017There were $0.1 million in cash deposits at March 31, 2024 and $1.0 million at December 31, 2016, cash deposits of $2.8 million and $1.8 million2023 related to commodity derivative contracts were reported in Prepaid expenses and other current assets in the Consolidated Balance Sheets, respectively.Sheets. These cash deposits have not been used to increase the reported net assets or reduce the reported net liabilities on the derivative contracts at September 30, 2017March 31, 2024 or December 31, 2016, respectively.2023.
An interest rate derivative that the Company used to effect the hedge entered into in August 2019 matured during the quarter ended September 30, 2023. The amount of pre-tax gains in accumulated other comprehensive loss that was reclassified into interest expense was $0.2 million for the three months ended March 31, 2023.
Note 8 –11 — Earnings Per Share
Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of stock options and restricted stock in the periods where such items are dilutive.
On January 25, 2016, the Company announced that it would proceed with an independent growth plan in which we will concentrate on acquiring land from third parties rather than acquiring land directly from Walmart. In conjunction with this announcement, theMay 2, 2023, our Board of Directors approved a strategic allocationshare repurchase authorization of capital forup to $1.5 billion that expires December 31, 2028, and excludes excise tax. As of March 31, 2024, approximately $1.3 billion remained under the 2023 authorization. For the three months ended March 31, 2024, the Company to pursue new additional growth opportunities and to undertake a share repurchase program of the Company's common stock. The Board authorized up to $500 million in total for this activity through December 31, 2017. For the nine months ended September 30, 2017, the Company acquired 2,252,828repurchased 216,036 shares of common stock for an average price of $67.47$402.14 per share including brokerage fees. Asfees and excise tax. For
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
the three months ended March 31, 2023, 48,848 shares were repurchased for an average price of September 30, 2017,$279.67 per share and were under the Company has remaining authority of $24.7 million under our current program.2021 repurchase authorization.
The following table providestables provide a reconciliation of basic and diluted earnings per share computations for the three and nine months ended September 30, 2017March 31, 2024 and 2016 (in thousands, except per share amounts):2023:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | | | Three Months Ended March 31, |
(Millions of dollars, except share and per share amounts) | | (Millions of dollars, except share and per share amounts) | | | | | | 2024 | | 2023 |
Earnings per common share: | | | | | | | |
Net income per share - basic | | | | | | | |
Net income per share - basic | |
Net income per share - basic | |
| Net income attributable to common stockholders | |
| Net income attributable to common stockholders | |
| Net income attributable to common stockholders | $ | 67,887 |
| | $ | 45,491 |
| | $ | 120,424 |
| | $ | 177,675 |
|
| | | | | | | |
Weighted average common shares outstanding (in thousands) | 35,423 |
| | 38,896 |
| | 36,253 |
| | 39,719 |
|
Weighted average common shares outstanding (in thousands) | |
Weighted average common shares outstanding (in thousands) | |
| | | | | | | |
Earnings per common share | $ | 1.92 |
| | $ | 1.17 |
| | $ | 3.32 |
| | $ | 4.47 |
|
| | | | | | | |
Earnings per common share | |
Earnings per common share | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
(Millions of dollars, except share and per share amounts) | | | | | | 2024 | | 2023 |
Earnings per common share - assuming dilution: | | | | | | | | |
Net income per share - diluted | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net income attributable to common stockholders | | | | | | $ | 66.0 | | | $ | 106.3 | |
| | | | | | | | |
Weighted average common shares outstanding (in thousands) | | | | | | 20,814 | | | 21,739 | |
Common equivalent shares: | | | | | | | | |
Dilutive share-based awards | | | | | | 348 | | | 394 | |
Weighted average common shares outstanding - assuming dilution (in thousands) | | | | | | 21,162 | | | 22,133 | |
| | | | | | | | |
Earnings per common share assuming dilution | | | | | | $ | 3.12 | | | $ | 4.80 | |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| | | | | | | | | | | | | | | |
Earnings per common share - assuming dilution: | | | | | | | |
Net income (loss) per share - diluted | | | | | | | |
Net income (loss) attributable to common stockholders | $ | 67,887 |
| | $ | 45,491 |
| | $ | 120,424 |
| | $ | 177,675 |
|
| | | | | | | |
Weighted average common shares outstanding (in thousands) | 35,423 |
| | 38,896 |
| | 36,253 |
| | 39,719 |
|
Common equivalent shares: | | | | | | | |
Dilutive options | 322 |
| | 278 |
| | 326 |
| | 270 |
|
Weighted average common shares outstanding - assuming dilution (in thousands) | 35,745 |
|
| 39,174 |
| | 36,579 |
| | 39,989 |
|
| | | | | | | |
Earnings per common share assuming dilution | $ | 1.90 |
| | $ | 1.16 |
| | $ | 3.29 |
| | $ | 4.44 |
|
We have excluded from the earnings-per-share calculation certain stock options and shares that are considered to be anti-dilutive under the treasury stock method. Formethod and are reported in the reported periods, the number of time-based restricted stock units, performance based units and non-qualified stock options that are excluded due to their anti-dilutive nature is immaterial.table below.
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
Potentially dilutive shares excluded from the calculation as their inclusion would be anti-dilutive | | | | | | 2024 | | 2023 |
Stock Options | | | | | | 16,597 | | | 38,100 | |
RSUs | | | | | | 151 | | | — | |
PSUs | | | | | | 5,689 | | | 12,767 | |
Total anti-dilutive shares | | | | | | 22,437 | | | 50,867 | |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 912 — Other Financial Information
OTHER OPERATING REVENUES – Other operating revenues in the Consolidated Statements of Income include the following items:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(Thousands of dollars) | 2017 | | 2016 | | 2017 | | 2016 |
Renewable Identification Numbers (RINs) sales | $ | 48,738 |
| | $ | 48,047 |
| | $ | 114,383 |
| | $ | 130,690 |
|
Other | 1,053 |
| | 772 |
| | 4,625 |
| | 2,940 |
|
Other operating revenues | $ | 49,791 |
| | $ | 48,819 |
| | $ | 119,008 |
| | $ | 133,630 |
|
CASH FLOW DISCLOSURES — Cash income taxes paid (collected), net of refunds,received were $29.3$0.1 million and $57.5$0.3 million for the nine monththree-month periods ended September 30, 2017March 31, 2024 and 2016,2023, respectively. Interest paid, net of amounts capitalized, was $32.4$30.4 million and $35.2$29.2 million for the nine monththree-month periods ended September 30, 2017March 31, 2024 and 2016,2023, respectively.
CHANGES IN WORKING CAPITAL: | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(Millions of dollars) | | 2024 | | 2023 |
Accounts receivable | | $ | (45.7) | | | $ | 16.5 | |
Inventories | | 48.6 | | | 15.5 | |
Prepaid expenses and other current assets | | (5.7) | | | 20.4 | |
Accounts payable and accrued liabilities | | (9.3) | | | (85.9) | |
Income taxes payable | | 16.3 | | | 3.1 | |
Net (increase) decrease in noncash operating working capital | | $ | 4.2 | | | $ | (30.4) | |
|
| | | | | | | |
| Nine Months Ended September 30, |
(Thousands of dollars) | 2017 | | 2016 |
Accounts receivable | $ | (8,850 | ) | | $ | (3,403 | ) |
Inventories | (47,433 | ) | | 3,364 |
|
Prepaid expenses and other current assets | 11,540 |
| | 11,891 |
|
Accounts payable and accrued liabilities | (25,153 | ) | | (6,289 | ) |
Income taxes payable | 11,622 |
| | (181 | ) |
Net decrease (increase) in noncash operating working capital | $ | (58,274 | ) | | $ | 5,382 |
|
Note 1013— Assets and Liabilities Measured at Fair Value
The Company carries certain assets and liabilities at fair value in its Consolidated Balance Sheets. The fair value hierarchy is based on the quality of inputs used to measure fair value, with Level 1 being the highest quality and Level 3 being the lowest quality. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1. Level 3 inputs are unobservable inputs which reflect assumptions about pricing by market participants.
The Company's available-for-sale marketable securities consist of high quality, investment grade securities from diverse issuers. We value these securities at the closing price in the principal active markets as of the last business day of the reporting period. The fair values of the Company's marketable securities by asset class are described in Note 4 "Marketable Securities" in these consolidated financial statements for the period ended March 31, 2024. We value the deferred compensation plan assets, which consist of money market and mutual funds, based on quoted prices in active markets at the measurement date. For additional information on deferred compensation plans see also Note 13 "Employee and Retirement Benefit Plans" in the audited consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K for more information.
At the balance sheet date, the fair value of commodity derivatives contracts was determined using NYMEX quoted values and the value of the Interest rate swap derivative was derived by using level 3 inputs. The carrying value of the Company’s Cash and cash equivalents, Accounts receivable-trade, Trade accounts payable, and accrued liabilities approximates fair value. See also Note 10 "Financial Instruments and Risk Management" in these consolidated financial statements for the period ended March 31, 2024, for more information.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
At the balance sheet date, the
Financial assets and liabilities measured at fair value of derivative contracts was determined using NYMEX quoted values but was immaterial.on a recurring basis
The following table presentstables present the carrying amountsCompany's financial assets and estimatedliabilities measured at fair valuesvalue on a recurring basis, as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
(Millions of dollars) | | Level 1 | | Level 2 | | Level 3 | | Fair Value |
Financial assets | | | | | | | | |
| | | | | | | | |
Marketable securities, current | | | | | | | | |
U.S. Government bonds | | $ | — | | | $ | 3.0 | | | $ | — | | | $ | 3.0 | |
U.S. Corporate bonds | | — | | | 3.1 | | | — | | | 3.1 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Prepaid expenses and other current assets: | | | | | | | | |
Fuel derivative | | — | | | — | | | 0.6 | | | 0.6 | |
Marketable securities, non-current | | | | | | | | |
U.S. Corporate bonds | | — | | | 3.0 | | | — | | | 3.0 | |
Non U.S. Corporate bonds | | — | | | 1.5 | | | — | | | 1.5 | |
Other assets | | | | | | | | |
Deferred compensation plan assets | | 13.9 | | | — | | | — | | | 13.9 | |
| | | | | | | | |
Financial liabilities | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Deferred credits and other liabilities | | | | | | | | |
Deferred compensation plan liabilities | | (23.0) | | | — | | | — | | | (23.0) | |
| | $ | (9.1) | | | $ | 10.6 | | | $ | 0.6 | | | $ | 2.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
(Millions of dollars) | | Level 1 | | Level 2 | | Level 3 | | Fair Value |
Financial assets | | | | | | | | |
| | | | | | | | |
Marketable securities, current | | | | | | | | |
U.S. Government bonds | | $ | — | | | $ | 3.0 | | | $ | — | | | $ | 3.0 | |
U.S. Corporate bonds | | — | | | 4.1 | | | — | | | 4.1 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Prepaid expenses and other current assets: | | | | | | | | |
Fuel derivative | | — | | | — | | | 0.6 | | | 0.6 | |
Marketable securities, non-current | | | | | | | | |
U.S. Corporate bonds | | — | | | 2.9 | | | — | | | 2.9 | |
Non U.S. Government bonds | | — | | | 1.5 | | | — | | | 1.5 | |
Other assets | | | | | | | | |
Deferred compensation plan assets | | 12.5 | | | — | | | — | | | 12.5 | |
| | | | | | | | |
Financial liabilities | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Deferred credits and other liabilities | | | | | | | | |
Deferred compensation plan liabilities | | (20.2) | | | — | | | — | | | (20.2) | |
| | $ | (7.7) | | | $ | 11.5 | | | $ | 0.6 | | | $ | 4.4 | |
Fair value of financial instruments held by the Companynot recognized at September 30, 2017 and December 31, 2016. fair value
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The table below excludes Cash and cash equivalents, Accounts receivable-trade, and Trade accounts payable and accrued liabilities, all of which had fair values approximating carrying
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
amounts. The fair value of Current and Long-term debt was estimated based on rates offered to the Company at that time for debt of the same maturities. The Company has off-balance sheet exposures relating to certain financial guarantees and letters of credit. The fair value of these, which represents fees associated with obtaining the instruments, was nominal.
The following table presents the carrying amounts and estimated fair values of financial instruments held by the Company at March 31, 2024 and December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2024 | | At December 31, 2023 |
| | Carrying | | | | Carrying | | |
(Millions of dollars) | | Amount | | Fair Value | | Amount | | Fair Value |
Financial liabilities | | | | | | | | |
Current and long-term debt, excluding finance leases | | $ | (1,672.9) | | | $ | (1,663.6) | | | $ | (1,673.0) | | | $ | (1,662.9) | |
|
| | | | | | | | | | | | | | | | |
| | At September 30, 2017 | | At December 31, 2016 |
| | Carrying | | | | Carrying | | |
(Thousands of dollars) | | Amount | | Fair Value | | Amount | | Fair Value |
Financial liabilities | | | | | | | | |
Current and long-term debt | | $ | (884,694 | ) | | $ | (917,858 | ) | | $ | (670,218 | ) | | $ | (690,114 | ) |
Note 1114 — Contingencies
The Company’s operations and earnings have been and may be affected by various forms of governmental action. Examples of such governmental action include, but are by no means limited to: tax increases and retroactive tax claims; import and export controls; price controls; allocation of supplies of crude oil and petroleum products and other goods; laws and regulations intended for the promotion of safety and the protection and/or remediation of the environment; governmental support for other forms of energy; and laws and regulations affecting the Company’s relationships with employees, suppliers, customers, stockholders and others. Because governmental actions are often motivated by political considerations, may be taken without full consideration of their consequences, and may be taken in response to actions of other governments, it is not practical to attempt to predict the likelihood of such actions, the form the actions may take or the effect such actions may have on the Company.
ENVIRONMENTAL MATTERS AND LEGAL MATTERS — Murphy USA is subject to numerous federal, state and local laws and regulations dealing with the environment. Violation of such environmental laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions and other sanctions. A discharge of hazardous substances into the environment could, to the extent such event is not insured, subject the Company to substantial expense, including both the cost to comply with applicable regulations and claims by neighboring landowners and other third parties for any personal injury, property damage and other losses that might result.
The Company currently owns or leases, and has in the past owned or leased, properties at which hazardous substances have been or are being handled. Although the Company believes it has used operating and disposal practices that were standard in the industry at the time, hazardous substances may have been disposed of or released on or under the properties owned or leased by the Company or on or under other locations where they have been taken for disposal. In addition, many of these properties have been operated by third parties whose management of hazardous substances was not under the Company’s control. Under existing laws, the Company could be required to remediate contaminated property (including contaminated groundwater) or to perform remedial actions to prevent future contamination. Certain of these contaminated properties are in various stages of negotiation, investigation, and/or cleanup, and the Company is investigating the extent of any related liability and the availability of applicable defenses. With the sale of the U.S. refineries in 2011, Murphy Oil retained certain liabilities related to environmental matters. Murphy Oil also obtained insurance covering certain levels of environmental exposures. TheWith respect to the previously owned refinery properties, Murphy Oil retained those liabilities in the Separation and Distribution agreement that was entered into related to the separation on August 30, 2013. With respect to any remaining potential liabilities, based on information currently available to the Company, the Company believes costs related to these sitesproperties will not have a material adverse effect on Murphy USA’s net income, financial condition or liquidity in a future period.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CertainWhile it is possible that certain environmental expenditures are likely tocould be recovered by the Company from other sources, primarily environmental funds maintained by certain states. Sincestates, no assurance can be given that future
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
recoveries from other sources will occur,occur. As such, the Company has not recorded a benefit for likely recoveries at September 30, 2017,March 31, 2024, however certain jurisdictions provide reimbursement for these expenses which have been considered in recording the net exposure.
The U.S. Environmental Protection Agency (EPA) currently considers the Company a Potentially Responsible Party (PRP) at one Superfund site. TheAs to the site, the potential total cost to all parties to perform necessary remedial work at this site may be substantial. However, based on current negotiations and available information, the Company believes that it is a de minimis party as to ultimate responsibility at the Superfund site. Accordingly, the Company has not recorded a liability for remedial costs at the Superfund site at September 30, 2017.March 31, 2024. The Company could be required to bear a pro rata share of costs attributable to nonparticipating PRPs or could be assigned additional responsibility for remediation at this site or other Superfund sites. TheBased on information currently available to the Company, the Company believes that its share of the ultimate costs to clean-upclean up this site will be immaterial and will not have a material adverse effect on its net income, financial condition or liquidity in a future period.
Based on information currently available to the Company, the amount of future remediation costs to be incurred to address known contamination sites is not expected to have a material adverse effect on the Company’s future net income, cash flows or liquidity. However, there is the possibility that additional environmental expenditures could be required to address contamination, including as a result of discovering additional contamination or the imposition of new or revised requirements applicable to known contamination.
Other than as noted above, Murphy USA is engaged in a number of other legal proceedings, all of which the Company considers routine and incidental to its business. Currently, the City of Charleston, South Carolina, and the State of Delaware have filed lawsuits against energy companies, including the Company. These lawsuits allege damages as a result of climate change and the plaintiffs are seeking unspecified damages and abatement under various tort theories. At this early stage, the ultimate outcome of these matters remain uncertain, and neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, can be determined. Based on information currently available to the Company, the ultimate resolution of thosethese other legal matters is not expected to have a material adverse effect on the Company’s net income, financial condition or liquidity in a future period.
INSURANCE — The Company maintains insurance coverage at levels that are customary and consistent with industry standards for companies of similar size. Murphy USA maintains statutory workers compensation insurance with a deductible of $1.0 million per occurrence, general liability insurance with a deductibleself-insured retention of $3.0 million per occurrence, and auto liability insurance with a deductible of $0.3 million per occurrence. As of September 30, 2017,March 31, 2024, there were a number of outstanding claims that are of a routine nature. The estimated incurred but unpaid liabilities relating to these claims are included in Trade account payables and accrued liabilities on the Consolidated Balance Sheets. While the ultimate outcome of these claims cannot presently be determined, management believes that the accrued liability of $19.9$47.9 million will be sufficient to cover the related liability for all insurance claims and that the ultimate disposition of these claims will have no material effect on the Company’s financial position and results of operations.
The Company has obtained insurance coverage as appropriate for the business in which it is engaged but may incur losses that are not covered by insurance or reserves, in whole or in part, and such losses could adversely affect our results of operations and financial position.
TAX MATTERS — Murphy USA is subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise/duty, sales/use and gross receipts taxes), payroll taxes, franchise taxes, withholding taxes and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities because of these audits may subject us to interest and penalties.
OTHER MATTERS — In the normal course of its business, the Company is required under certain contracts with various governmental authorities and others to provide financial guarantees or letters of credit that may be drawn upon if the Company fails to perform under those contracts. At September 30, 2017,March 31, 2024, the Company had contingent liabilities of $15.4$10.2 million on outstanding letters of credit. The Company has not accrued a liability in its balance sheet related to these financial guarantees and letters of credit because it is believed that the likelihood of having these drawn is remote.
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 15 — Lease Accounting
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have remaining lease terms of 2 year or less to 36 years, which may include the option to extend the lease when it is reasonably certain the Company will exercise the option. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 5 to 20 years or more. The exercise of lease renewal options is at the Company's sole discretion. Due to the uncertainties of future markets, economic factors, technology changes, demographic shifts and behavior, environmental regulatory requirements and other information that impacts decisions as to store location, management has determined that it was not reasonably certain to exercise contract options and they are not included in the lease term. Additionally, short-term leases and leases with variable lease costs are immaterial. The Company reviews all options to extend, terminate, or otherwise modify its lease agreements to determine if changes are required to the right-of-use assets and liabilities.
As the implicit interest rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Lessor — We have various arrangements for certain spaces for food service and vending equipment as well as subleases under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is immaterial.
Lessee — We lease land for 451 stores and store sites, one terminal, a hangar and various equipment. Our lease agreements do not contain any material residual value guarantees. Included in our leased land are 102 properties leased from Walmart which contain restrictive covenants, though the restrictions are deemed to have an immaterial impact.
Leases are reflected in the following balance sheet accounts:
| | | | | | | | | | | | | | | | | |
(Millions of dollars) | Classification | | March 31, 2024 | | December 31, 2023 |
Assets | | | | | |
Operating (Right-of-use) | Operating lease right-of-use assets, net | | $ | 452.8 | | | $ | 452.1 | |
Finance | Property, plant, and equipment, at cost, less accumulated depreciation of $46.1 at March 31, 2024 and $42.6 at December 31, 2023 | | 111.9 | | | 113.8 | |
Total leased assets | | | $ | 564.7 | | | $ | 565.9 | |
| | | | | |
Liabilities | | | | | |
Current | | | | | |
Operating | Trade accounts payable and accrued liabilities | | $ | 22.2 | | | $ | 22.1 | |
Finance | Current maturities of long-term debt | | 11.3 | | | 11.0 | |
Noncurrent | | | | | |
Operating | Non-current operating lease liabilities | | 452.1 | | | 450.3 | |
Finance | Long-term debt, including capitalized lease obligations | | 114.2 | | | 115.7 | |
Total lease liabilities | | | $ | 599.8 | | | $ | 599.1 | |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
Lease Cost: | | | | | | Three Months Ended March 31, |
(Millions of dollars) | | Classification | | | | | | 2024 | | 2023 |
Operating lease cost | | Store and other operating expenses | | | | | | $ | 14.1 | | | $ | 13.4 | |
Finance lease cost | | | | | | | | | | |
Amortization of leased assets | | Depreciation and amortization | | | | | | 3.7 | | | 3.8 | |
Interest on lease liabilities | | Interest expense | | | | | | 2.1 | | | 2.4 | |
Net lease costs | | | | | | | | $ | 19.9 | | | $ | 19.6 | |
| | | | | | | | | | | | | | | | | |
Cash Flow Information: | | | Three Months Ended March 31, |
(Millions of dollars) | | | 2024 | | 2023 |
Cash paid for amounts included in the measurement of liabilities | | | |
Operating cash flows from operating leases | | | $ | 13.1 | | | $ | 12.3 | |
Operating cash flows from finance leases | | | $ | 2.1 | | | $ | 2.4 | |
Financing cash flows from finance leases | | | $ | 2.9 | | | $ | 2.8 | |
| | | | | | | | | | | | | | |
Maturity of Lease Liabilities at March 31, 2024: | | | |
(Millions of dollars) | | Operating leases | | Finance leases |
2024 | | $ | 40.1 | | | $ | 14.6 | |
2025 | | 53.2 | | | 18.5 | |
2026 | | 52.5 | | | 17.4 | |
2027 | | 51.7 | | | 16.3 | |
2028 | | 51.2 | | | 15.6 | |
After 2028 | | 550.0 | | | 106.9 | |
Total lease payments | | 798.7 | | | 189.3 | |
less: interest | | 324.4 | | | 63.8 | |
Present value of lease liabilities | | $ | 474.3 | | | $ | 125.5 | |
| | | | | | | | | | | |
Lease Term and Discount Rate: | | | Three Months Ended March 31, |
| | | 2024 |
Weighted average remaining lease term (years) | | | |
Finance leases | | | 12.0 |
Operating leases | | | 15.0 |
Weighted average discount rate | | | |
Finance leases | | | 6.8 | % |
Operating leases | | | 6.6 | % |
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 16 — Business SegmentSegments
The Company's operations have one operating segment which is Marketing. TheOur operations include the sale of retail motor fuel products and convenience merchandise along with the wholesale and bulk sale capabilities of our Product Supplyproduct supply and Wholesale ("PS&W")wholesale group. As the primary purpose of the PS&Wproduct supply and wholesale group is to support our retail operations and provide fuel for their daily operation, the bulk and wholesale fuel sales are secondary to the support functions performedplayed by these groups.this group. As such, they are all treated as one segment for reporting purposes as they sell the same products.products and have similar economic characteristics. This Marketing segment contains essentially all of the revenue generating functionsactivities of the Company. Results not included in the reportable segment include Corporate and Other Assets. The reportable segment was determined based on information reviewed by the Chief Operating Decision Maker (CODM).Maker.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| | | | March 31, 2024 | | March 31, 2023 |
(Millions of dollars) | | Total Assets at March 31, 2024 | | External Revenues | | Income (Loss) | | External Revenues | | Income (Loss) |
Marketing | | $ | 4,106.9 | | | $ | 4,843.6 | | | $ | 85.5 | | | $ | 5,077.1 | | | $ | 125.9 | |
Corporate and other assets | | 200.1 | | | 0.1 | | | (19.5) | | | 0.1 | | | (19.6) | |
Total | | $ | 4,307.0 | | | $ | 4,843.7 | | | $ | 66.0 | | | $ | 5,077.2 | | | $ | 106.3 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| | | | September 30, 2017 | | September 30, 2016 |
| | Total Assets at | | External | | Income | | External | | Income |
(Thousands of dollars) | | September 30, | | Revenues | | (Loss) | | Revenues | | (Loss) |
Marketing | | $ | 2,031,120 |
| | $ | 3,236,333 |
| | $ | 75,830 |
| | $ | 3,042,727 |
| | $ | 52,755 |
|
Corporate and other assets | | 248,387 |
| | 18 |
| | (7,943 | ) | | 11 |
| | (7,264 | ) |
Total | | $ | 2,279,507 |
| | $ | 3,236,351 |
| | $ | 67,887 |
| | $ | 3,042,738 |
| | $ | 45,491 |
|
| | | | | | | | | | |
| | | | Nine Months Ended |
| | | | September 30, 2017 | | September 30, 2016 |
| | | | External | | Income | | External | | Income |
(Thousands of dollars) | | | | Revenues | | (Loss) | | Revenues | | (Loss) |
Marketing | | | | 9,446,777 |
| | 140,144 |
| | $ | 8,538,535 |
| | $ | 198,622 |
|
Corporate and other assets | | | | 252 |
| | (19,720 | ) | | 227 |
| | (20,947 | ) |
Total | | | | $ | 9,447,029 |
| | $ | 120,424 |
| | $ | 8,538,762 |
| | $ | 177,675 |
|
Note 13– Guarantor Subsidiaries
Certain of the Company’s 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries”) fully and unconditionally guarantee, on a joint and several basis, certain of the outstanding indebtedness of the Company, including the 6.00% senior notes due 2023 and the 5.625% senior notes due 2027. The following consolidating schedules present financial information on a consolidated basis in conformity with the SEC’s Regulation S-X Rule 3-10(d):
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEET
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | September 30, 2017 |
Assets | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | 169,009 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 169,014 |
|
Accounts receivable—trade, less allowance for doubtful accounts of $1,094 in 2017 | — |
| | 192,443 |
| | — |
| | — |
| | — |
| | 192,443 |
|
Inventories, at lower of cost or market | — |
| | 200,765 |
| | — |
| | — |
| | — |
| | 200,765 |
|
Prepaid expenses and other current assets | — |
| | 13,535 |
| | 3 |
| | — |
| | — |
| | 13,538 |
|
Total current assets | — |
| | 575,752 |
| | 8 |
| | — |
| | — |
| | 575,760 |
|
Property, plant and equipment, at cost less accumulated depreciation and amortization of $846,212 in 2017 | — |
| | 1,658,622 |
| | 788 |
| | — |
| | — |
| | 1,659,410 |
|
Investments in subsidiaries | 2,098,535 |
| | 144,898 |
| | — |
| | — |
| | (2,243,433 | ) | | — |
|
Other assets | — |
| | 44,337 |
| | — |
| | — |
| | — |
| | 44,337 |
|
Total assets | $ | 2,098,535 |
| | $ | 2,423,609 |
| | $ | 796 |
| | $ | — |
| | $ | (2,243,433 | ) | | $ | 2,279,507 |
|
Liabilities and Stockholders' Equity | |
| | |
| | |
| | |
| | |
| | |
|
Current liabilities | |
| | |
| | |
| | |
| | |
| | |
|
Current maturities of long-term debt | $ | — |
| | $ | 19,719 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 19,719 |
|
Inter-company accounts payable | 775,215 |
| | (569,617 | ) | | (51,260 | ) | | (154,338 | ) | | — |
| | — |
|
Trade accounts payable and accrued liabilities | — |
| | 454,074 |
| |
|
| | — |
| | — |
| | 454,074 |
|
Income taxes payable | — |
| | 12,203 |
| | 13 |
| | — |
| | — |
| | 12,216 |
|
Total current liabilities | 775,215 |
| | (83,621 | ) | | (51,247 | ) | | (154,338 | ) | | — |
| | 486,009 |
|
Long-term debt, including capitalized lease obligations | — |
| | 864,975 |
| | — |
| | — |
| | — |
| | 864,975 |
|
Deferred income taxes | — |
| | 222,085 |
| | — |
| | — |
| |
|
| | 222,085 |
|
Asset retirement obligations | — |
| | 27,489 |
| | — |
| | — |
| | — |
| | 27,489 |
|
Deferred credits and other liabilities | — |
| | 13,856 |
| | — |
| | — |
| | — |
| | 13,856 |
|
Total liabilities | 775,215 |
| | 1,044,784 |
| | (51,247 | ) | | (154,338 | ) | | — |
| | 1,614,414 |
|
Stockholders' Equity | |
| | |
| | |
| | |
| | |
| | |
|
Preferred Stock, par $0.01 (authorized 20,000,000 shares, none outstanding) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Common Stock, par $0.01 (authorized 200,000,000 shares, 46,767,164 shares issued at September 30, 2017) | 468 |
| | 1 |
| | 60 |
| | — |
| | (61 | ) | | 468 |
|
Treasury Stock (11,971,014 shares held at September 30, 2017) | (753,019 | ) | | — |
| | — |
| | — |
| | — |
| | (753,019 | ) |
Additional paid in capital (APIC) | 1,206,176 |
| | 570,608 |
| | 52,004 |
| | 87,543 |
| | (1,368,382 | ) | | 547,949 |
|
Retained earnings | 869,695 |
| | 808,216 |
| | (21 | ) | | 66,795 |
| | (874,990 | ) | | 869,695 |
|
Total stockholders' equity | 1,323,320 |
| | 1,378,825 |
| | 52,043 |
| | 154,338 |
| | (2,243,433 | ) | | 665,093 |
|
Total liabilities and stockholders' equity | $ | 2,098,535 |
| | $ | 2,423,609 |
| | $ | 796 |
| | $ | — |
| | $ | (2,243,433 | ) | | $ | 2,279,507 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEET
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | December 31, 2016 |
Assets | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | 153,813 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 153,813 |
|
Accounts receivable—trade, less allowance for doubtful accounts of $1,891 in 2016 | — |
| | 183,519 |
| | — |
| | — |
| | — |
| | 183,519 |
|
Inventories, at lower of cost or market | — |
| | 153,351 |
| | — |
| | — |
| | — |
| | 153,351 |
|
Prepaid expenses and other current assets | — |
| | 24,871 |
| | — |
| | — |
| | — |
| | 24,871 |
|
Total current assets | — |
| | 515,554 |
| | — |
| | — |
| | — |
| | 515,554 |
|
Property, plant and equipment, at cost less accumulated depreciation and amortization of $780,426 in 2016 | — |
| | 1,532,655 |
| | — |
| | — |
| | — |
| | 1,532,655 |
|
Investments in subsidiaries | 1,978,110 |
| | 144,917 |
| | — |
| | — |
| | (2,123,027 | ) | | — |
|
Other assets | — |
| | 40,531 |
| | — |
| | — |
| | — |
| | 40,531 |
|
Total assets | $ | 1,978,110 |
| | $ | 2,233,657 |
| | $ | — |
| | $ | — |
| | $ | (2,123,027 | ) | | $ | 2,088,740 |
|
Liabilities and Stockholders' Equity | |
| | |
| | |
| | |
| | |
| | |
|
Current liabilities | |
| | |
| | |
| | |
| | |
| | |
|
Current maturities of long-term debt | $ | — |
| | $ | 40,596 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 40,596 |
|
Inter-company accounts payable | 623,316 |
| | (416,914 | ) | | (52,064 | ) | | (154,338 | ) | | — |
| | — |
|
Trade accounts payable and accrued liabilities | — |
| | 473,370 |
| | — |
| | — |
| | — |
| | 473,370 |
|
Income taxes payable | — |
| | 591 |
| | 3 |
| | — |
| | — |
| | 594 |
|
Total current liabilities | 623,316 |
| | 97,643 |
| | (52,061 | ) | | (154,338 | ) | | — |
| | 514,560 |
|
Long-term debt, including capitalized lease obligations | — |
| | 629,622 |
| | — |
| | — |
| | — |
| | 629,622 |
|
Deferred income taxes | — |
| | 204,656 |
| | — |
| | — |
| | — |
| | 204,656 |
|
Asset retirement obligations | — |
| | 26,200 |
| | — |
| | — |
| | — |
| | 26,200 |
|
Deferred credits and other liabilities | — |
| | 16,626 |
| | — |
| | — |
| | — |
| | 16,626 |
|
Total liabilities | 623,316 |
| | 974,747 |
| | (52,061 | ) | | (154,338 | ) | | — |
| | 1,391,664 |
|
Stockholders' Equity | |
| | |
| | |
| | |
| | |
| | |
|
Preferred Stock, par $0.01 (authorized 20,000,000 shares, none outstanding) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Common Stock, par $0.01 (authorized 200,000,000 shares, 46,767,164 shares issued at December 31, 2016) | 468 |
| | 1 |
| | 60 |
| | — |
| | (61 | ) | | 468 |
|
Treasury Stock (9,831,196 shares held at December 31, 2016) | (608,001 | ) | | — |
| | — |
| | — |
| | — |
| | (608,001 | ) |
Additional paid in capital (APIC) | 1,213,056 |
| | 571,117 |
| | 52,004 |
| | 87,543 |
| | (1,368,382 | ) | | 555,338 |
|
Retained earnings | 749,271 |
| | 687,792 |
| | (3 | ) | | 66,795 |
| | (754,584 | ) | | 749,271 |
|
Total stockholders' equity | 1,354,794 |
| | 1,258,910 |
| | 52,061 |
| | 154,338 |
| | (2,123,027 | ) | | 697,076 |
|
Total liabilities and stockholders' equity | $ | 1,978,110 |
| | $ | 2,233,657 |
| | $ | — |
| | $ | — |
| | $ | (2,123,027 | ) | | $ | 2,088,740 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Three Months Ended September 30, 2017 |
Operating Revenues | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Petroleum product sales | $ | — |
| | $ | 2,580,985 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2,580,985 |
|
Merchandise sales | — |
| | 605,575 |
| | — |
| | — |
| | — |
| | 605,575 |
|
Other operating revenues | — |
| | 49,791 |
| | — |
| | — |
| | — |
| | 49,791 |
|
Total operating revenues | $ | — |
| | $ | 3,236,351 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3,236,351 |
|
| | | | | | | | | | | |
Operating Expenses | |
| | |
| | |
| | |
| | |
| | |
|
Petroleum product cost of goods sold | — |
| | 2,419,124 |
| | — |
| | — |
| | — |
| | 2,419,124 |
|
Merchandise cost of goods sold | — |
| | 507,921 |
| | — |
| | — |
| | — |
| | 507,921 |
|
Station and other operating expenses | — |
| | 130,371 |
| | 4 |
| | — |
| | — |
| | 130,375 |
|
Depreciation and amortization | — |
| | 28,980 |
| | 9 |
| | — |
| | — |
| | 28,989 |
|
Selling, general and administrative | — |
| | 31,535 |
| | — |
| | — |
| | — |
| | 31,535 |
|
Accretion of asset retirement obligations | — |
| | 447 |
| | — |
| | — |
| | — |
| | 447 |
|
Total operating expenses | — |
| | 3,118,378 |
| | 13 |
| | — |
| | — |
| | 3,118,391 |
|
| | | | | | | | | | | |
Gain (loss) on sale of assets | $ | — |
| | $ | (58 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (58 | ) |
Income (loss) from operations | $ | — |
| | $ | 117,915 |
| | $ | (13 | ) | | $ | — |
| | $ | — |
| | $ | 117,902 |
|
| | | | | | | | | | | |
Other income (expense) | |
| | |
| | |
| | |
| | |
| | |
|
Interest income | — |
| | 466 |
| | — |
| | — |
| | — |
| | 466 |
|
Interest expense | — |
| | (12,726 | ) | | — |
| | — |
| | — |
| | (12,726 | ) |
Other nonoperating income | — |
| | 3,034 |
| | — |
| | — |
| | — |
| | 3,034 |
|
Total other income (expense) | $ | — |
| | $ | (9,226 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (9,226 | ) |
Income (loss) before income taxes | — |
| | 108,689 |
| | (13 | ) | | — |
| | — |
| | 108,676 |
|
Income tax expense | — |
| | 40,789 |
| | — |
| | — |
| | — |
| | 40,789 |
|
Income (loss) | — |
| | 67,900 |
| | (13 | ) | | — |
| | — |
| | 67,887 |
|
Equity earnings in affiliates, net of tax | 67,887 |
| | (13 | ) | | — |
| | — |
| | (67,874 | ) | | — |
|
Net Income (Loss) | $ | 67,887 |
| | $ | 67,887 |
| | $ | (13 | ) | | $ | — |
| | $ | (67,874 | ) | | $ | 67,887 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Three Months Ended September 30, 2016 |
Operating Revenues | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Petroleum product sales | $ | — |
| | $ | 2,394,951 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2,394,951 |
|
Merchandise sales | — |
| | 598,968 |
| | — |
| | — |
| | — |
| | 598,968 |
|
Other operating revenues | — |
| | 48,819 |
| | — |
| | — |
| | — |
| | 48,819 |
|
Total operating revenues | $ | — |
| | $ | 3,042,738 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3,042,738 |
|
| | | | | | | | | | | |
Operating Expenses | |
| | |
| | |
| | |
| | |
| | |
|
Petroleum product cost of goods sold | — |
| | 2,275,487 |
| | — |
| | — |
| | — |
| | 2,275,487 |
|
Merchandise cost of goods sold | — |
| | 503,266 |
| | — |
| | — |
| | — |
| | 503,266 |
|
Station and other operating expenses | — |
| | 127,991 |
| | — |
| | — |
| | — |
| | 127,991 |
|
Depreciation and amortization | — |
| | 25,576 |
| | — |
| | — |
| | — |
| | 25,576 |
|
Selling, general and administrative | — |
| | 30,726 |
| | — |
| | — |
| | — |
| | 30,726 |
|
Accretion of asset retirement obligations | — |
| | 411 |
| | — |
| | — |
| | — |
| | 411 |
|
Total operating expenses | — |
| | 2,963,457 |
| | — |
| | — |
| | — |
| | 2,963,457 |
|
| | | | | | | | | | | |
Gain (loss) on sale of assets | $ | — |
| | $ | (335 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (335 | ) |
Income from operations | $ | — |
| | $ | 78,946 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 78,946 |
|
| | | | | | | | | | | |
Other income (expense) | |
| | |
| | |
| | |
| | |
| | |
|
Interest income | — |
| | 144 |
| | — |
| | — |
| | — |
| | 144 |
|
Interest expense | — |
| | (10,182 | ) | | — |
| | — |
| | — |
| | (10,182 | ) |
Other nonoperating income | — |
| | 2,848 |
| | — |
| | — |
| | — |
| | 2,848 |
|
Total other income (expense) | $ | — |
| | $ | (7,190 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (7,190 | ) |
Income before income taxes | — |
| | 71,756 |
| | — |
| | — |
| | — |
| | 71,756 |
|
Income tax expense | — |
| | 26,265 |
| | — |
| | — |
| | — |
| | 26,265 |
|
Income | — |
| | 45,491 |
| | — |
| | — |
| | — |
| | 45,491 |
|
Equity earnings in affiliates, net of tax | 45,491 |
| | — |
| | — |
| | — |
| | (45,491 | ) | | — |
|
Net Income (Loss) | $ | 45,491 |
| | $ | 45,491 |
| | $ | — |
| | $ | — |
| | $ | (45,491 | ) | | $ | 45,491 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Nine Months Ended September 30, 2017 |
Operating Revenues | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Petroleum product sales | $ | — |
| | $ | 7,550,958 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7,550,958 |
|
Merchandise sales | — |
| | 1,777,063 |
| | — |
| | — |
| | — |
| | 1,777,063 |
|
Other operating revenues | — |
| | 119,006 |
| | 2 |
| | — |
| | — |
| | 119,008 |
|
Total operating revenues | $ | — |
| | $ | 9,447,027 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 9,447,029 |
|
| | | | | | | | | | | |
Operating Expenses | |
| | |
| | |
| | |
| | |
| | |
|
Petroleum product cost of goods sold | — |
| | 7,161,632 |
| | — |
| | — |
| | — |
| | 7,161,632 |
|
Merchandise cost of goods sold | — |
| | 1,492,861 |
| | — |
| | — |
| | — |
| | 1,492,861 |
|
Station and other operating expenses | — |
| | 384,548 |
| | 4 |
| | — |
| | — |
| | 384,552 |
|
Depreciation and amortization | — |
| | 83,499 |
| | 15 |
| | — |
| | — |
| | 83,514 |
|
Selling, general and administrative | — |
| | 101,127 |
| | 1 |
| | — |
| | — |
| | 101,128 |
|
Accretion of asset retirement obligations | — |
| | 1,335 |
| | — |
| | — |
| | — |
| | 1,335 |
|
Total operating expenses | — |
| | 9,225,002 |
| | 20 |
| | — |
| | — |
| | 9,225,022 |
|
| | | | | | | | | | | |
Gain (loss) on sale of assets | $ | — |
| | $ | (3,426 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (3,426 | ) |
Income (loss) from operations | $ | — |
| | $ | 218,599 |
| | $ | (18 | ) | | $ | — |
| | $ | — |
| | $ | 218,581 |
|
| | | | | | | | | | | |
Other income (expense) | |
| | |
| | |
| | |
| | |
| | |
|
Interest income | — |
| | 831 |
| | — |
| | — |
| | — |
| | 831 |
|
Interest expense | — |
| | (33,868 | ) | | — |
| | — |
| | — |
| | (33,868 | ) |
Other nonoperating income | — |
| | 3,269 |
| | — |
| | — |
| | — |
| | 3,269 |
|
Total other income (expense) | $ | — |
| | $ | (29,768 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (29,768 | ) |
Income (loss) before income taxes | — |
| | 188,831 |
| | (18 | ) | | — |
| | — |
| | 188,813 |
|
Income tax expense | — |
| | 68,389 |
| | — |
| | — |
| | — |
| | 68,389 |
|
Income (loss) | — |
| | 120,442 |
| | (18 | ) | | — |
| | — |
| | 120,424 |
|
Equity earnings in affiliates, net of tax | 120,424 |
| | (18 | ) | | — |
| | — |
| | (120,406 | ) | | — |
|
Net Income (Loss) | $ | 120,424 |
| | $ | 120,424 |
| | $ | (18 | ) | | $ | — |
| | $ | (120,406 | ) | | $ | 120,424 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING INCOME STATEMENT
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Nine Months Ended September 30, 2016 |
Operating Revenues | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Petroleum product sales | $ | — |
| | $ | 6,654,970 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 6,654,970 |
|
Merchandise sales | — |
| | 1,750,162 |
| | — |
| | — |
| | — |
| | 1,750,162 |
|
Other operating revenues | — |
| | 133,630 |
| | — |
| | — |
| | — |
| | 133,630 |
|
Total operating revenues | $ | — |
| | $ | 8,538,762 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 8,538,762 |
|
| | | | | | | | | | | |
Operating Expenses | |
| | |
| | |
| | |
| | |
| | |
|
Petroleum product cost of goods sold | — |
| | 6,301,552 |
| | — |
| | — |
| | — |
| | 6,301,552 |
|
Merchandise cost of goods sold | — |
| | 1,475,869 |
| | — |
| | — |
| | — |
| | 1,475,869 |
|
Station and other operating expenses | — |
| | 369,910 |
| | — |
| | — |
| | — |
| | 369,910 |
|
Depreciation and amortization | — |
| | 72,747 |
| | — |
| | — |
| | — |
| | 72,747 |
|
Selling, general and administrative | — |
| | 94,548 |
| | 1 |
| | — |
| | — |
| | 94,549 |
|
Accretion of asset retirement obligations | — |
| | 1,236 |
| | — |
| | — |
| | — |
| | 1,236 |
|
Total operating expenses | — |
| | 8,315,862 |
| | 1 |
| | — |
| | — |
| | 8,315,863 |
|
| | | | | | | | | | | |
Gain (loss) on sale of assets | $ | — |
| | $ | 88,640 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 88,640 |
|
Income from operations | $ | — |
| | $ | 311,540 |
| | $ | (1 | ) | | $ | — |
| | $ | — |
| | $ | 311,539 |
|
| | | | | | | | | | | |
Other income (expense) | |
| | |
| | |
| | |
| | |
| | |
|
Interest income | — |
| | 474 |
| | — |
| | — |
| | — |
| | 474 |
|
Interest expense | ��� |
| | (29,780 | ) | | — |
| | — |
| | — |
| | (29,780 | ) |
Other nonoperating income | — |
| | 2,966 |
| | — |
| | — |
| | — |
| | 2,966 |
|
Total other income (expense) | $ | — |
| | $ | (26,340 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (26,340 | ) |
Income before income taxes | — |
| | 285,200 |
| | (1 | ) | | — |
| | — |
| | 285,199 |
|
Income tax expense (benefit) | — |
| | 107,524 |
| | — |
| | — |
| | — |
| | 107,524 |
|
Income | — |
| | 177,676 |
| | (1 | ) | | — |
| | — |
| | 177,675 |
|
Equity earnings in affiliates, net of tax | 177,675 |
| | (1 | ) | | — |
| | — |
| | (177,674 | ) | | — |
|
Net Income (Loss) | $ | 177,675 |
| | $ | 177,675 |
| | $ | (1 | ) | | $ | — |
| | $ | (177,674 | ) | | $ | 177,675 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CASH FLOW
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Nine Months Ended September 30, 2017 |
Operating Activities | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net income (loss) | $ | 120,424 |
| | $ | 120,424 |
| | $ | (18 | ) | | $ | — |
| | $ | (120,406 | ) | | $ | 120,424 |
|
Adjustments to reconcile net income (loss) to net cash provided by (required by) operating activities | |
| | |
| | |
| | |
| | |
| | |
|
Depreciation and amortization | — |
| | 83,499 |
| | 15 |
| | — |
| | — |
| | 83,514 |
|
Deferred and noncurrent income tax charges (credits) | — |
| | 17,429 |
| | — |
| | — |
| | — |
| | 17,429 |
|
Accretion of asset retirement obligations | — |
| | 1,335 |
| | — |
| | — |
| | — |
| | 1,335 |
|
(Gain) loss on sale of assets | — |
| | 3,426 |
| | — |
| | — |
| | — |
| | 3,426 |
|
Net decrease in noncash operating working capital | — |
| | (58,271 | ) | | (3 | ) | | — |
| | — |
| | (58,274 | ) |
Equity in earnings of affiliates | (120,424 | ) | | 18 |
| | — |
| | — |
| | 120,406 |
| | — |
|
Other operating activities - net | — |
| | (1,488 | ) | | — |
| | — |
| | — |
| | (1,488 | ) |
Net cash provided by (required by) operating activities | — |
| | 166,372 |
| | (6 | ) | | — |
| | — |
| | 166,366 |
|
Investing Activities | |
| | |
| | |
| | |
| | |
| | |
|
Property additions | — |
| | (200,728 | ) | | (804 | ) | | — |
| | — |
| | (201,532 | ) |
Proceeds from sale of assets | — |
| | 689 |
| | — |
| | — |
| | — |
| | 689 |
|
Changes in restricted cash | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other investing activities - net | — |
| | (4,599 | ) | | — |
| | — |
| | — |
| | (4,599 | ) |
Net cash required by investing activities | — |
| | (204,638 | ) | | (804 | ) | | — |
| | — |
| | (205,442 | ) |
Financing Activities | |
| | |
| | |
| | |
| | |
| | |
|
Purchase of treasury stock | (152,009 | ) | | — |
| | — |
| | — |
| | — |
| | (152,009 | ) |
Borrowings of debt | — |
| | 338,750 |
| | — |
| | — |
| | — |
| | 338,750 |
|
Repayments of debt | — |
| | (126,134 | ) | | — |
| | — |
| | — |
| | (126,134 | ) |
Debt issuance costs | — |
| | (1,100 | ) | | — |
| | — |
| | — |
| | (1,100 | ) |
Amounts related to share-based compensation | — |
| | (5,230 | ) | | — |
| | — |
| | — |
| | (5,230 | ) |
Net distributions to parent | 152,009 |
| | (152,824 | ) | | 815 |
| | — |
| | — |
| | — |
|
Net cash provided by financing activities | — |
| | 53,462 |
| | 815 |
| | — |
| | — |
| | 54,277 |
|
Net increase in cash and cash equivalents | — |
| | 15,196 |
| | 5 |
| | — |
| | — |
| | 15,201 |
|
Cash and cash equivalents at January 1 | — |
| | 153,813 |
| | — |
| | — |
| | — |
| | 153,813 |
|
Cash and cash equivalents at September 30 | $ | — |
| | $ | 169,009 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | 169,014 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CASH FLOW
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Nine Months Ended September 30, 2016 |
Operating Activities | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Net income (loss) | $ | 177,675 |
| | $ | 177,675 |
| | $ | (1 | ) | | $ | — |
| | $ | (177,674 | ) | | $ | 177,675 |
|
Adjustments to reconcile net income (loss) to net cash provided by (required by)operating activities | |
| | |
| | |
| | |
| | |
| | |
|
Depreciation and amortization | — |
| | 72,747 |
| | — |
| | — |
| | — |
| | 72,747 |
|
Deferred and noncurrent income tax charges (credits) | — |
| | 37,636 |
| | — |
| | — |
| | — |
| | 37,636 |
|
Accretion of asset retirement obligations | — |
| | 1,236 |
| | — |
| | — |
| | — |
| | 1,236 |
|
Pretax (gains) losses from sale of assets | — |
| | (88,640 | ) | | — |
| | — |
| | — |
| | (88,640 | ) |
Net decrease in noncash operating working capital | — |
| | 5,382 |
| | — |
| | — |
| | — |
| | 5,382 |
|
Equity in earnings of affiliates | (177,675 | ) | | 1 |
| | — |
| | — |
| | 177,674 |
| | — |
|
Other operating activities - net | — |
| | 3,792 |
| | — |
| | — |
| | — |
| | 3,792 |
|
Net cash provided by (required by) operating activities | — |
| | 209,829 |
| | (1 | ) | | — |
| | — |
| | 209,828 |
|
Investing Activities | |
| | |
| | |
| | |
| | |
| | |
|
Property additions | — |
| | (198,911 | ) | | — |
| | — |
| | — |
| | (198,911 | ) |
Proceeds from sale of assets | — |
| | 85,001 |
| | — |
| | — |
| | — |
| | 85,001 |
|
Changes in restricted cash | — |
| | 68,571 |
| | — |
| | — |
| | — |
| | 68,571 |
|
Other investing activities - net | — |
| | (28,888 | ) | | — |
| | — |
| | — |
| | (28,888 | ) |
Net cash required by investing activities | — |
| | (74,227 | ) | | — |
| | — |
| | — |
| | (74,227 | ) |
Financing Activities | |
| | |
| | |
| | |
| | |
| | |
|
Purchase of treasury stock | (212,328 | ) | | — |
| | — |
| | — |
| | — |
| | (212,328 | ) |
Borrowings of debt | — |
| | 200,000 |
| | — |
| | — |
| | — |
| | 200,000 |
|
Repayments of debt | — |
| | (10,281 | ) | | — |
| | — |
| | — |
| | (10,281 | ) |
Debt issuance costs | — |
| | (3,240 | ) | | — |
| | — |
| | — |
| | (3,240 | ) |
Amounts related to share-based compensation | — |
| | (5,395 | ) | | — |
| | — |
| | — |
| | (5,395 | ) |
Net distributions to parent | 212,328 |
| | (212,329 | ) | | 1 |
| | — |
| | — |
| | — |
|
Net cash provided by (required) by financing activities | — |
| | (31,245 | ) | | 1 |
| | — |
| | — |
| | (31,244 | ) |
Net increase in cash and cash equivalents | — |
| | 104,357 |
| | — |
| | — |
| | — |
| | 104,357 |
|
Cash and cash equivalents at January 1 | — |
| | 102,335 |
| | — |
| | — |
| | — |
| | 102,335 |
|
Cash and cash equivalents at September 30 | $ | — |
| | $ | 206,692 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 206,692 |
|
Murphy USA Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF CHANGES IN EQUITY
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Nine Months Ended September 30, 2017 |
Statement of Stockholders' Equity | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Common Stock | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2016 | $ | 468 |
| | $ | 1 |
| | $ | 60 |
| | $ | — |
| | $ | (61 | ) | | $ | 468 |
|
Issuance of common stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Balance as of September 30, 2017 | $ | 468 |
| | $ | 1 |
| | $ | 60 |
| | $ | — |
| | $ | (61 | ) | | $ | 468 |
|
Treasury Stock | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2016 | $ | (608,001 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (608,001 | ) |
Issuance of common stock | 6,991 |
| | — |
| | — |
| | — |
| | — |
| | 6,991 |
|
Repurchase of common stock | (152,009 | ) | | — |
| | — |
| | — |
| | — |
| | (152,009 | ) |
Balance as of September 30, 2017 | $ | (753,019 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (753,019 | ) |
APIC | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2016 | $ | 1,213,056 |
| | $ | 571,117 |
| | $ | 52,004 |
| | $ | 87,543 |
| | $ | (1,368,382 | ) | | $ | 555,338 |
|
Issuance of common stock | (6,880 | ) | | — |
| | — |
| | — |
| | — |
| | (6,880 | ) |
Amounts related to share-based compensation | — |
| | (5,230 | ) | | — |
| | — |
| | — |
| | (5,230 | ) |
Share-based compensation expense | — |
| | 4,721 |
| | — |
| | — |
| | — |
| | 4,721 |
|
Balance as of September 30, 2017 | $ | 1,206,176 |
| | $ | 570,608 |
| | $ | 52,004 |
| | $ | 87,543 |
| | $ | (1,368,382 | ) | | $ | 547,949 |
|
Retained Earnings | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2016 | $ | 749,271 |
| | $ | 687,792 |
| | $ | (3 | ) | | $ | 66,795 |
| | $ | (754,584 | ) | | $ | 749,271 |
|
Net income (loss) | 120,424 |
| | 120,424 |
| | (18 | ) | | — |
| | (120,406 | ) | | 120,424 |
|
Balance as of September 30, 2017 | $ | 869,695 |
| | $ | 808,216 |
| | $ | (21 | ) | | $ | 66,795 |
| | $ | (874,990 | ) | | $ | 869,695 |
|
CONSOLIDATING STATEMENT OF CHANGES IN EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Thousands of dollars) | Nine Months Ended September 30, 2016 |
Statement of Stockholders' Equity | Parent Company | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated |
Common Stock | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2015 | $ | 468 |
| | $ | 1 |
| | $ | 60 |
| | $ | — |
| | $ | (61 | ) | | $ | 468 |
|
Issuance of common stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Balance as of September 30, 2016 | $ | 468 |
| | $ | 1 |
| | $ | 60 |
| | $ | — |
| | $ | (61 | ) | | $ | 468 |
|
Treasury Stock | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2015 | $ | (294,139 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (294,139 | ) |
Issuance of common stock | 9,356 |
| | — |
| | — |
| | — |
| | — |
| | 9,356 |
|
Repurchase of common stock | (212,328 | ) | | — |
| | — |
| | — |
| | — |
| | (212,328 | ) |
Balance as of September 30, 2016 | $ | (497,111 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (497,111 | ) |
APIC | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2015 | $ | 1,222,465 |
| | $ | 564,554 |
| | $ | 52,004 |
| | $ | 87,543 |
| | $ | (1,368,384 | ) | | $ | 558,182 |
|
Issuance of common stock | (9,356 | ) | | — |
| | — |
| | — |
| | — |
| | (9,356 | ) |
Amounts related to share-based compensation | — |
| | (5,395 | ) | | — |
| | — |
| | — |
| | (5,395 | ) |
Share-based compensation expense | — |
| | 6,945 |
| | — |
| | — |
| | — |
| | 6,945 |
|
Balance as of September 30, 2016 | $ | 1,213,109 |
| | $ | 566,104 |
| | $ | 52,004 |
| | $ | 87,543 |
| | $ | (1,368,384 | ) | | $ | 550,376 |
|
Retained Earnings | |
| | |
| | |
| | |
| | |
| | |
|
Balance as of December 31, 2015 | $ | 527,779 |
| | $ | 466,300 |
| | $ | (2 | ) | | $ | 66,795 |
| | $ | (533,093 | ) | | $ | 527,779 |
|
Net income (loss) | 177,675 |
| | 177,675 |
| | (1 | ) | | — |
| | (177,674 | ) | | 177,675 |
|
Balance as of September 30, 2016 | $ | 705,454 |
| | $ | 643,975 |
| | $ | (3 | ) | | $ | 66,795 |
| | $ | (710,767 | ) | | $ | 705,454 |
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONANDRESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Management’s Discussion and Analysis” or "MD&A") is the Company’s analysis of its financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes included in this Quarterly Report on Form 10-Q. ItThe MD&A contains forward-looking statements including, without limitation, statements relating toand the Company’s plans, strategies, objectives, expectations and intentions. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,�� “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company’s disclosures under “Forward-Looking Statements” and “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.
For purposes of this Management’s Discussion and Analysis, references to “Murphy USA”, the “Company”, “we”, “us” and “our” refer to Murphy USA Inc. and its subsidiaries on a consolidated basis.
Management’s Discussion and Analysis is organized as follows:
•Executive Overview—This section provides an overview of our business and the results of operations and financial condition for the periods presented. It includes information on the basis of presentation with respect to the amounts presented in the Management’s Discussion and Analysis and a discussion of the trends affecting our business.
•Results of Operations—This section provides an analysis of our results of operations, including the results of our operating segment for the three and nine months ended September 30, 2017March 31, 2024 and 2016.
2023.
•Capital Resources and Liquidity—This section provides a discussion of our financial condition and cash flows as of and for the three and nine months ended September 30, 2017March 31, 2024 and 2016.2023. It also includes a discussion of our capital structure and available sources of liquidity.
•Critical Accounting Policies—This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.
Executive Overview
The following MD&A is intended to help the reader understand our results of operations and financial condition. This section is provided to supplement, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to these financial statements contained elsewhere in this Quarterly Report on Form 10-Q, this MD&A section and the consolidated financial statements in our Annual Report on Form 10-K. Our Form 10-K contains a discussion of matters not included within this document, such as disclosures regarding critical accounting policies and estimates, and contractual obligations.
Our Business
We market refined products throughThe Company owns and operates a networkchain of retail stores that market gasoline stations and to unbranded wholesale customers. Our owned retail stationsother merchandise under the brand names of Murphy USA® and Murphy Express, most of which are almost all located in close proximity to Walmart stores, principally in the Southeast, Midwest and useSouthwest areas of the United States. We also have a mix of convenience stores and retail gasoline stores located in New Jersey and New York that operate under the brand name Murphy USA®of QuickChek®. We also market gasoline and other products at standalone stations under the Murphy Express brand. At September 30, 2017,March 31, 2024, we had a total of 1,4231,733 Company stationsstores in 2627 states, principally inof which 1,579 were Murphy branded and 154 were under the Southeast, SouthwestQuickChek brand. We also market petroleum products to unbranded wholesale customers through a mixture of Company-owned and Midwest United States. third-party terminals.
Basis of Presentation
Murphy USA was incorporated in March 2013, and until the separation from Murphy Oil Corporation was completed on August 30, 2013, it had not commenced operations and had no material assets, liabilities or commitments. The financial information presented in this Management’s Discussion and Analysis is derived from the consolidated financial statements of Murphy USA Inc. and its subsidiaries for all periods presented. Our QuickChek subsidiaries use a weekly retail calendar where each quarter typically has 13 weeks. For Q1 2024, the QuickChek results cover the period December 30, 2023 to March 29, 2024. For Q1 2023, the QuickChek
results cover the period December 31, 2022 to March 31, 2023. The difference in the timing of the period ends is immaterial to the overall consolidated results.
Trends Affecting Our Business
Our operations are significantly impacted by the gross margins we receive on our fuel and merchandise sales. TheseThe fuel gross margins are commodity-based, change daily, and are volatile. While we generally expect our total fuel sales volumes to growvolume and the gross margins we realize on those sales to remain strong, these gross marginsstable in a normalized environment, they can change rapidly due to many factors. These factors include, but are not limited to, the price of refined products, geopolitical events that disrupt the global supply, overall demand, and prices of crude oil, interruptions in our fuel and merchandise supply chain caused by severe weather or pandemics, the effects from pandemics such as travel restrictions and stay-at-home orders imposed during a pandemic, new or changing legislation around tobacco and e-cigarettes as well as fuel economy and vehicle emission standards, severe refinery mechanical failures for an extended period of time, cyber-attacks against the Company or our vendors, changing economic conditions that lower consumer purchasing power such as inflation, and competition in the local markets in which we operate.
The cost of our main salesfuel products, gasoline and diesel, is greatly impacted by the cost of crude oil in the United States. Generally,Historically, a rising pricesprice environment for crude oil increaseincreases the Company’s cost for wholesale fuel products purchased. When wholesalepurchased and increases retail fuel costs rise, the Company is not always able to immediately pass these cost increases on to its retail customers at the pump, which in turn reduces the Company’s sales margin. Also, risingprices. Rising prices tend tocan cause our customersconsumers to reduce discretionary fuel consumption, however our low-price model can also serve as a hedge to draw new customers which generally reduces ourcan offset the potential loss of discretionary volumes. In Q1 2024, crude oil prices were relatively stable with prices ranging from $71 per barrel to $84 per barrel with an average price in Q1 2024 of $78 per barrel, compared to a average price of $76 per barrel in Q1 2023. Total fuel sales volumes.contribution (retail fuel margin plus product supply and wholesale ("PS&W") results which include Renewable Identification Numbers ("RINs")) was 24.8 cents per gallon ("cpg") in Q1 2024, compared to 28.9 cpg in Q1 2023. Retail fuel margins were strongermargin dollars decreased 5.6% in the current year quarter duewhile retail fuel volumes improved 1.0% when compared to more favorable market conditions. PS&W results were stronger due to elements beyond normal seasonality, including the impact of hurricanes Harvey and Irma. The improvement in the current period was largely attributable to timing and inventory benefits due to rising wholesale prices, and to a lesser extent, modest improvement in the spot-to-rack differential.Q1 2023.
In addition, ourOur revenues are impacted by ourthe ability to leverage our diverse supply infrastructure in pursuit of obtaining the lowest cost of fuel supply available; for example, activities such as blending bulk fuel with ethanolrenewable fuels (ethanol and bio-dieselbio-diesel) to capture and subsequently sell Renewable Identification Numbers (“RINs”).RINs. Under the Energy Policy Act of 2005, the Environmental Protection Agency (“EPA”) is authorized to set annual quotas establishing the percentage of motor fuels consumed in the United States that must be attributable to renewable fuels. Obligated parties are required to demonstrate that they have met any applicable quotas by submitting a certain amount of RINs to the EPA. RINs in excess of the set quota can be sold in a market for RINs at then-prevailing prices. The market price for RINs fluctuates based on a variety of factors, including but not limited to governmental and regulatory action. There are other market related factors that can affectimpact the net impact we receive fromrevenue received for RINs on a company-wide basis either favorably or unfavorably. The Renewable Fuel Standard ("RFS") program continues to be unpredictable and prices received by us for ethanol RINs averaged $0.57 per RIN in Q1 2024 compared to $1.60 per RIN in Q1 2023. Our business model does not depend on our ability to generate revenues from RINs.RINs, and we have historically observed that changes in revenue are typically coupled with offsetting changes in cost of goods that minimizes the majority of any revenue movement. Revenue from the sales of RINs is included in “Other operating revenues” in the Consolidated Statements of Income.
As of September 30, 2017,March 31, 2024, we have $800 millionhad $1.3 billion of Senior Notes and $97a $389 million of term loan outstanding. We believe that we will generate sufficient cash from operations to fund our ongoing operating requirements.requirements and service our debt obligations. At March 31, 2024, we had additional available capacity under the committed $350 million cash flow revolving credit facility, with none drawn. We expect to use the credit facilities to provide us with available financing intended to meet any short-term ongoing cash needs in excess of internally generated cash flows. To the extent necessary, we will borrow under these facilities to fund our ongoing operating requirements. At September 30, 2017, we have additional available capacity under the committed $450 million credit facilities (subject to the borrowing base), together with capacity under a $150 million incremental uncommitted facility.requirements and other corporate initiatives. There can be no assurances, however, that we will generate sufficient cash from operations or be able to draw on the credit facilities, obtain commitments for our incremental facility, and/or obtain and draw upon other credit facilities. For additional information, see Significant Sources of Capital in the Capital Resources and Liquidity section.
On December 21, 2012, we signed an agreement with Walmart providing for the potential purchase of land to develop new Company stations located adjacent to existing Walmart stores in Walmart’s core market area covering the Southeast, Southwest and Midwest United States. The construction program is expected to be completed in 2017 relative to the 2012 sites. In connection with this agreement, we expect to incur additional station operating and depreciation expenses due to the addition of new stores. The Company currently anticipates total capital expenditures (including purchases of Walmart properties and other land for future developments) for the full year 20172024 to range from approximately $250$400 million to $300$450 million depending on how many new sitesstores are developed.completed. We intend to fund the remainder of our capital program in 20172024 primarily using operating cash flow but will supplement funding where necessary usingthrough borrowings under availableour revolving credit facilities.
We believe that our business will continue to grow in the future as we expect to buildexpand additional capabilities such as food and beverage within our network. We maintain a pipeline of desirable future store locations chosen by our real estate development team that have the characteristics we look for in a strong site.development. The pace of this growth is continually monitored by our management, and these plans can be altered based on operating cash flows generated and the availability of creditdebt facilities.
We currently estimate our ongoing effective tax rate to be approximately 38.0%between 24% and 26% for the remainder of the year.
Seasonality
Our business has inherent seasonality due to the concentration of our retail sitesstores in certain geographic areas, as well as customer activity behaviors during different seasons. In general, sales volumes and operating incomes are typically highest in the second and third quarters during the summer activitysummer-activity months and lowest during the winter months. As a result, operating results for the three and nine months ended September 30, 2017 areMarch 31, 2024, may not necessarily be indicative of the results that may be expected for the remainder of the year ending December 31, 2017.2024.
Business Segment
The Company has one operating segment which is Marketing. ThisThe Marketing segment includes our retail marketing sitesstores and product supply and wholesale assets.
For additional operating segment information, see Note 2022 “Business Segments” in the audited combined financial statements for the three year period ended December 31, 20162023 included with our Annual Report on Form 10-K and Note 1216 “Business Segment”Segments” in the accompanying unaudited consolidated financial statements for the three and nine months ended September 30, 2017.March 31, 2024.
Results of Operations
ConsolidatedResults
For the three month periodmonths ended September 30, 2017,March 31, 2024, the Company reported net income of $67.9$66.0 million, or $1.90$3.12 per diluted share, on revenue of $3.24$4.8 billion. Net income was $45.5$106.3 million for the same period in 2016,2023, or $1.16$4.80 per diluted share, on $3.04$5.1 billion inof revenue. The increasedecrease in quarterly net income was primarily drivendue to lower total fuel contribution combined with increases in store operating expenses, general and administrative expenses, and depreciation and amortization expense, which were partially offset by higher total margin contribution from both fuel sales volumes, higher overall merchandise contributions, and merchandise.lower income tax expense.
For the nine month period ended September 30, 2017, the Company reported net income of $120.4 million, or $3.29 per diluted share, on revenue of $9.45 billion. Net income was $177.7 million for the same period in 2016, or $4.44 per diluted share, on $8.54 billion in revenue. The decrease in year-to-date net income is primarily due to the inclusion of the gain on the disposition of the CAM pipeline in first quarter 2016.
ThreeMonthsEndedSeptember 30, 2017March 31, 2024versus Three Months Ended September 30, 2016March 31, 2023
Quarterly revenuesRevenues for 2017 increased $193.6 million,Q1 2024 decreased $0.3 billion, or 6.4%4.6%, compared to the same quarter in 2016.2023. The higherdecrease in revenues were caused by higherwas due to 5.4% lower retail fuel sales prices and increased store count in 2017,PS&W revenues which were partially offset by a decrease1.0% higher fuel sales volumes and an increase in retail fuel volumes.merchandise sales prices and units.
Total cost of sales increased $148.3 million,in Q1 2024 decreased $0.2 billion, or 5.3%4.3%, when compared to 2016.Q1 2023. In the current yearcurrent-year quarter, the decrease was primarily due to lower fuel cost and was partially offset by higher fuel purchase costs in all areas were driven byvolumes sold and higher wholesale prices and increased store count.merchandise costs.
StationStore and other operating expenses increased $2.4$13.8 million, or 1.9%5.8%, in Q1 2024 from 2016. IncreasedQ1 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with net new store count and higher retail fuel prices generated greater total payment fees during the 2017 quarter, which primarily contributed to the increase in station and operating expenses.
Selling, general and administrative (SG&A)("SG&A") expenses for 2017Q1 2024 increased $0.8$3.1 million, or 2.6%5.3%, from 2016. The increase in SG&A costs is primarily due to timing of technology related expenses on a quarter-over-quarter basis.
The effective tax rate was 37.5% for the 2017 quarter and 36.6% for the 2016 quarter. The effective tax rate for the current quarter is higher than the U.S. Federal tax rate of 35% but is in line with our estimated effective tax rate of 38% for the full year.
NineMonthsEndedSeptember 30, 2017versus Nine Months Ended September 30, 2016
Year-to-date revenues for 2017 increased $908.3 million, or 10.6%, compared to the same nine month period in 2016. The higher revenues were caused by higher retail fuel prices and merchandise sales combined with increased store count in 2017.
Total cost of sales increased $877.1 million, or 11.3%, compared to 2016. This increase is primarily due to higher fuel purchase costs in all areas in the 2017 period and increased store count in 2017.
Station and other operating expenses increased $14.6 million, or 4.0%, from 2016. Higher store count in the current period generated greater payment fees and maintenance costs, which were the primary contributors to the increase in station and operating expenses.
Selling, general and administrative (SG&A) expenses for 2017 increased $6.6 million, or 7.0%, from 2016.Q1 2023. The increase in SG&A costs is primarily due to higher laboremployee costs incurred in Q1 2024.
Depreciation and employee benefit costs relatedamortization expense increased $2.3 million in Q1, or 4.1%, when compared to a previously announced restructuring charge combined with slightly increased headcount, as well as spendingthe same period of 2023, primarily due to higher cost for technology projects.the new larger store formats for Murphy USA stores and raze-and-rebuild activity in the period.
The effective income tax rate was 36.2%approximately 19.4% for the first nine months of 2017 and 37.7% for the 2016 period.Q1 2024 compared to approximately 23.5% in Q1 2023. The current yearQ1 2024 effective tax rate is lower due primarily due to excess tax benefits on equity awards that vested during the recognition of certain tax benefits.quarter.
SegmentResults
A summary of the Company’s earningsnet income by business segment follows:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
(Millions of dollars) | | | | | | 2024 | | 2023 |
Marketing | | | | | | $ | 85.5 | | | $ | 125.9 | |
Corporate and other assets | | | | | | (19.5) | | | (19.6) | |
| | | | | | | | |
Net Income | | | | | | $ | 66.0 | | | $ | 106.3 | |
Marketing
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Thousands of dollars) | | 2017 | | 2016 | | 2017 | | 2016 |
Marketing | | $ | 75,830 |
| | $ | 52,755 |
| | $ | 140,144 |
| | $ | 198,622 |
|
Corporate and other assets | | (7,943 | ) | | (7,264 | ) | | (19,720 | ) | | (20,947 | ) |
Net Income | | $ | 67,887 |
| | $ | 45,491 |
| | $ | 120,424 |
| | $ | 177,675 |
|
ThreeMonthsEndedSeptember 30, 2017March 31, 2024versus Three Months Ended September 30, 2016March 31, 2023
NetMarketing segment net income for the three months ended September 30, 2017 increased March 31, 2024 was lower compared to the same period in 20162023 primarily due to:
•Lower total fuel contribution
•Higher retail fuel margin per gallon
Higher merchandise margin
Increased RINs sales volumes
The items below partially offset the increase in earnings in the current period:
Higher stationstore and other operating expenseexpenses
•Higher interest expense due to the issuance of the 2027 Senior Notes in April 2017SG&A expenses
Lower retail fuel volumes
NineMonthsEndedSeptember 30, 2017versus Nine Months Ended September 30, 2016
Net income for the nine months ended September 30, 2017 decreased compared to the same period in 2016primarily due to:
No repeat of the gain from the disposition of CAM pipeline
Slightly higher total station and other operating expenses
Increased G&A expense related to the timing of technology related expenses
The items below partially offset the decrease in earningsnet income in the current period:
•Higher fuel sales volumes
•Higher merchandise gross margin dollars from higher sales and improved rebatescontribution
Improved retail fuel margins in the current year due to higher margins
| | | | | | | | | | | | | | | | | | | | | |
(Millions of dollars, except revenue per same store sales (in thousands) and store counts) | | | | Three Months Ended March 31, | |
Marketing Segment | | | | | | 2024 | | 2023 | |
| | | | | | | | | |
Operating Revenues | | | | | | | | | |
Petroleum product sales | | | | | | $ | 3,811.7 | | | $ | 3,994.2 | | |
Merchandise sales | | | | | | 1,000.7 | | | 966.2 | | |
Other operating revenues | | | | | | 31.2 | | | 116.7 | | |
Total operating revenues | | | | | | 4,843.6 | | | 5,077.1 | | |
| | | | | | | | | |
Operating expenses | | | | | | | | | |
Petroleum products cost of goods sold | | | | | | 3,556.1 | | | 3,780.6 | | |
Merchandise cost of goods sold | | | | | | 809.1 | | | 779.1 | | |
Store and other operating expenses | | | | | | 252.1 | | | 238.2 | | |
Depreciation and amortization | | | | | | 54.9 | | | 52.4 | | |
Selling, general and administrative | | | | | | 62.1 | | | 59.0 | | |
Accretion of asset retirement obligations | | | | | | 0.8 | | | 0.8 | | |
Total operating expenses | | | | | | 4,735.1 | | | 4,910.1 | | |
| | | | | | | | | |
Gain (loss) on sale of assets | | | | | | (0.1) | | | (0.2) | | |
Income (loss) from operations | | | | | | 108.4 | | | 166.8 | | |
| | | | | | | | | |
Other income (expense) | | | | | | | | | |
Interest expense | | | | | | (2.1) | | | (2.3) | | |
| | | | | | | | | |
Total other income (expense) | | | | | | $ | (2.1) | | | $ | (2.3) | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
(Millions of dollars, except revenue per same store sales (in thousands) and store counts) | | | | Three Months Ended March 31, | |
Marketing Segment | | | | | | 2024 | | 2023 | |
Income (loss) before income taxes | | | | | | $ | 106.3 | | | $ | 164.5 | | |
Income tax expense (benefit) | | | | | | 20.8 | | | 38.6 | | |
Net income (loss) from operations | | | | | | $ | 85.5 | | | $ | 125.9 | | |
| | | | | | | | | |
Total tobacco sales revenue same store sales1,2 | | | | | | $ | 126.2 | | | $ | 119.6 | | |
Total non-tobacco sales revenue same store sales1,2 | | | | | | 68.8 | | | 69.6 | | |
Total merchandise sales revenue same store sales1,2 | | | | | | $ | 195.0 | | | $ | 189.2 | | |
12023 amounts not revised for 2024 raze-and-rebuild activity | | | | | |
2Includes store-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points | |
| | | | | | | | | |
Store count at end of period | | | | | | 1,733 | | | 1,720 | | |
Total store months during the period | | | | | | 5,164 | | | 5,141 | | |
|
| | | | | | | | | | | | | | | |
(Thousands of dollars, except volume per store month and margins) | Three Months Ended September 30, | | Nine Months Ended September 30, |
Marketing Segment | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | |
Operating Revenues | | | | | | | |
Petroleum product sales | $ | 2,580,985 |
| | $ | 2,394,951 |
| | $ | 7,550,958 |
| | $ | 6,654,970 |
|
Merchandise sales | 605,575 |
| | 598,968 |
| | 1,777,063 |
| | 1,750,162 |
|
Other operating revenues | 49,773 |
| | 48,808 |
| | 118,756 |
| | 133,403 |
|
Total operating revenues | 3,236,333 |
| | 3,042,727 |
| | 9,446,777 |
| | 8,538,535 |
|
Operating expenses | |
| | |
| | |
| | |
|
Petroleum products cost of goods sold | 2,419,124 |
| | 2,275,487 |
| | 7,161,632 |
| | 6,301,552 |
|
Merchandise cost of goods sold | 507,921 |
| | 503,266 |
| | 1,492,861 |
| | 1,475,869 |
|
Station and other operating expenses | 130,371 |
| | 127,991 |
| | 384,548 |
| | 369,910 |
|
Depreciation and amortization | 27,352 |
| | 23,939 |
| | 78,660 |
| | 67,972 |
|
Selling, general and administrative | 31,535 |
| | 30,727 |
| | 101,128 |
| | 94,549 |
|
Accretion of asset retirement obligations | 447 |
| | 411 |
| | 1,335 |
| | 1,236 |
|
Total operating expenses | 3,116,750 |
| | 2,961,821 |
| | 9,220,164 |
| | 8,311,088 |
|
Gain (loss) on sale of assets | (58 | ) | | (336 | ) | | (3,426 | ) | | 88,640 |
|
Income from operations | 119,525 |
| | 80,570 |
| | 223,187 |
| | 316,087 |
|
Other income | |
| | |
| | |
| | |
|
Interest expense | (20 | ) | | (14 | ) | | (59 | ) | | (35 | ) |
Other nonoperating income (expense) | 2,939 |
| | 2,730 |
| | 3,169 |
| | 2,771 |
|
Total other income (expense) | 2,919 |
| | 2,716 |
| | 3,110 |
| | 2,736 |
|
Income before income taxes | 122,444 |
| | 83,286 |
| | 226,297 |
| | 318,823 |
|
Income tax expense | 46,614 |
| | 30,531 |
| | 86,153 |
| | 120,201 |
|
Net Income | $ | 75,830 |
| | $ | 52,755 |
| | $ | 140,144 |
| | $ | 198,622 |
|
| | | | | | | |
Gallons sold per store month | 242,810 |
| | 268,259 |
| | 246,398 |
| | 259,681 |
|
Fuel margin (cpg) | 15.5 |
| | 13.7 |
| | 14.1 |
| | 11.9 |
|
Fuel margin $ per store month | $ | 37,514 |
| | $ | 36,761 |
| | $ | 34,722 |
| | $ | 30,969 |
|
|
| | | | | | | | | | | | | | | |
Total tobacco sales revenue per store month | $ | 104,432 |
| | $ | 111,898 |
| | $ | 103,454 |
| | $ | 109,427 |
|
Total non-tobacco sales revenue per store month | $ | 38,491 |
| | $ | 35,763 |
| | $ | 37,712 |
| | $ | 35,837 |
|
Total merchandise sales revenue per store month | $ | 142,923 |
| | $ | 147,661 |
| | $ | 141,166 |
| | $ | 145,264 |
|
| | | | | | | |
Merchandise margin $ per store month | $ | 23,049 |
| | $ | 23.593 |
| | $ | 22.578 |
| | $ | 22.766 |
|
Merchandise margin as a percentage of merchandise sales | 16.1 | % | | 16.0 | % | | 16.0 | % | | 15.7 | % |
Store count at end of period | 1,423 |
| | 1,364 |
| | 1,423 |
| | 1,364 |
|
Total store months during the period | 4,237 |
| | 4,056 |
| | 12,588 |
| | 12,048 |
|
Three Months EndedSeptember 30, 2017 versus Three Months EndedSeptember 30, 2016
Net income in the Marketing segmentfor 2017 increased $23.1 million compared to the 2016 period. The primary driver was the 32.7% increase in total fuel contribution to 20.5 cpg in 2017. Additionally, merchandise gross margin increased 2.0% to $97.7 million.
Total revenues for the Marketing segment were approximately $3.2 billion for2017 and $3.0 billion for 2016. Revenuesincluded excise taxes collected and remitted to government authorities of $489 million in2017 and $506 million in 2016. The primary cause of the uplift in revenues was a $0.25 per gallon increase in retail fuel price in the 2017 quarter.
Total fuel sales volumes per station were down 9.5% to 242,810gallons perstoremonth in the 2017 period from 268,259gallons perstoremonth in 2016. This decline is due to subdued retail demand, the temporary closure of five high-performing stores for raze and rebuild activity and hurricane-related impacts. Retail fuel margin increased 13.1% in the 2017 quarter to 15.5 cpg, compared to 13.7 cpg in the prior yearquarter. Retail fuel margins increased in third quarter 2017 as falling wholesale product prices late in the period created a more favorable market structure and environment versus the consistently rising wholesale prices in third quarter 2016.
Total PS&W margin dollars, excluding RINs, were $3.6 million in the 2017 period compared to negative $29.0 million in 2016. The improvement in the current period was largely attributable to timing and inventory benefits due to rising wholesale prices, and to a lesser extent, modest improvement in the spot-to-rack differential.
The 2017 period includes the sale of RINs of $48.7 million compared to $48.0 million in 2016. During the 2017 quarter, 59 million RINs were sold at an average selling price of $0.83 per RIN while the prior year quarter had sales of 54 million RINs at an average price of $0.89 per RIN.
Merchandise total sales increased 1.1%to $605.6 million in2017 from $599.0 million in 2016 and was primarily due to an increase in non-tobacco sales of 7.6% average per store monthAverage Per Store Month ("APSM"), offset by a decrease in tobacco products revenue of 6.7% APSM.Quarterly merchandise margins in 2017werehigher than 2016. The increase in gross margin dollars of 2.0% in the current period was due primarily to continual turnover to new, high-demand products, in addition to per store improvements, partially offset by margin decreases on a per-store basis. As a result, total unit margins were up by 10 basis points from 16.0% in the prior period to 16.1% in the current quarter.
Station and otheroperating expenses increased $2.4 million in the current period compared to 2016 levels. Total operating expenses in 2017 were higher, reflecting increased payment fees and new store additions. On an APSM basis, expenses applicable to retail declined 5.4%, primarily because of lower labor costs in the period combined with lower maintenance per store due to timing of work performed.
Depreciation expense increased $3.4 million in the 2017period, an increase of 14.3%over the prior period. This increase was primarily caused by more stores operating in the 2017period compared to the prior yearperiod.
Selling, general and administrative (SG&A)expenses increased $0.8 million, or 2.6%, in2017. Thisincrease was due to timing of technology related expenses quarter-over-quarter.
Nine Months EndedSeptember 30, 2017 versus Nine Months EndedSeptember 30, 2016
Net income in the Marketing segmentfor 2017 decreased $58.5 million compared to the 2016 period. The primary reason for this decline was no repeat of the gain from the disposition of the CAM pipeline in the prior year. This decline was partially offset by higher merchandise margins. Chain wide retail fuel sales volumes declined 0.9% to 3.1 billion gallons sold in 2017.
Total revenues for the Marketing segment were approximately $9.4 billion for2017 and $8.5 billion for 2016. Revenuesincluded excise taxes collected and remitted to government authorities of $1.47 billion in2017 and $1.47 billion in 2016. The primary cause of the significant increase in revenues was a $0.26 per gallon increase in retail fuel price in the 2017 period.
Total fuel sales volumes per station were down 5.1% to 246,398gallons perstoremonth in the 2017 period from 259,681gallons perstoremonth in 2016. This decline is partially due to subdued retail demand combined with the temporary closure of 17 high-performing stores for a significant part of the period for raze and rebuild activity combined with hurricane-related impacts in the current period. Retail fuel margin increased 18.5% in the 2017 period to 14.1 cpg, compared to 11.9 cpg in the prior year. Retail fuel margins increased in 2017 as volatility was more pronounced in the 2017 period compared to the same period in 2016.
Total PS&W margin dollars, excluding RINs, were negative $45.6 million in the 2017 period compared to negative $20.8 million in 2016. The decrease in the year-to-date period was largely caused by record-high gasoline inventories, subdued retail demand, and discounted pipeline space values.
The 2017 period includes the sale of RINs of $114.4 million compared to $130.7 million in 2016. During the period, 172 million RINs were sold at an average selling price of $0.66 per RIN while the prior year had sales of 165 million RINs at an average price of $0.79 per RIN.
Merchandise total sales increased 1.5%to $1.78 billion in2017 from $1.75 billion in 2016 and was primarily due to an increase in non-tobacco sales of 5.2% APSM, offset by a decrease in tobacco products revenue of 5.5% APSM. Year-to-date merchandise margins in 2017werehigher than 2016. The increase in gross margin dollars of 3.6% in the period was due primarily to more favorable pricing and improved promotional effectiveness, partially offset by margin decreases on a per-store basis. As a result, total unit margins were up by 30 basis points from 15.7% in the prior period to 16.0% in the current year.
Station and otheroperating expenses increased $14.6 million in the current period compared to 2016 levels. Total station and other operating expenses in 2017 were higher, reflecting increased payment fees and new store additions. On an APSM basis, expenses applicable to retail declined 3.5%, primarily because of lower labor costs in the period.
Depreciation expense increased $10.7 million in the 2017period, an increase of 15.7%over the prior period. This increase was primarily caused by more stores operating in the 2017period compared to the prior yearperiod.
Selling, general and administrative (SG&A)expenses increased $6.6 million, or 7.0%, in2017. Thisincrease was due to higher labor and employee benefit costs related to a previously announced restructuring charge combined with slightly increased headcount, as well as certain technology related costs.
Same store sales ("SSS") comparison
|
| | | | | | | | | | | |
| Variance from prior year |
| Three months ended | | Nine months ended |
| September 30, 2017 | | September 30, 2017 |
| SSS | | APSM | | SSS | | APSM |
Fuel gallons per month | (8.9 | )% | | (9.5 | )% | | (4.6 | )% | | (5.1 | )% |
| | | | | | | |
Merchandise sales | (2.4 | )% | | (3.2 | )% | | (1.5 | )% | | (2.8 | )% |
Tobacco sales | (4.9 | )% | | (6.7 | )% | | (3.1 | )% | | (5.5 | )% |
Non-tobacco sales | 5.4 | % | | 7.6 | % | | 3.5 | % | | 5.2 | % |
| | | | | | | |
Merchandise margin | (1.6 | )% | | (2.3 | )% | | 0.2 | % | | (0.8 | )% |
Tobacco margin | (0.7 | )% | | (3.3 | )% | | 1.1 | % | | (1.6 | )% |
Non-tobacco margin | (2.8 | )% | | (0.9 | )% | | (1.1 | )% | | 0.3 | % |
Historically, the Company has used the APSM metric to represent certain data on a per site basis. The APSM metric includes all stores open through the date of the calculation. Other retailers have used samecalculation, including stores acquired during the period.
Same store sales (SSS) as their metric. The table above shows the comparison of APSM to SSS for 3 specific items. In most cases, the SSS("SSS") metric is more favorable than the APSM metric. The primary reason for this is that SSS does not include new stores that have been opened a short time and are still developing their customer base. The difference between the APSM and SSS results highlights the impact of our growing mix of small store formats (e.g. 1200 sq. ft.) which have a higher mix of non-tobacco sales and a ramp up period on tobacco sales.
The same store sales comparison includes aggregated individual store results for all stores open throughout both periods presented. For all periods presented, the store must have been open for the entire calendar year to be included in the comparison. Remodeled stores that remained open or were closed for just a very brief time (less than a month) during the period being compared remain in the same store sales calculation. If a store is replaced either at the same location (raze and rebuild)(raze-and-rebuild) or relocated to a new location, it will typically be excluded from the calculation.calculation during the period it is out of service. Newly constructed sites, including raze-and-rebuildsstores do not enter the calculation until they are open for each full calendar year for the periods being compared (open by January 1, 20162023 for the sitesstores being compared in the 20172024 versus 2016 calculations)2023 comparison). Acquired stores are not included in the calculation of same stores for the first 12 months after the acquisition. When prior period same store sales volumes or sales are presented, they have not been revised for current year activity for raze-and-rebuilds, asset acquisitions and asset dispositions.
Corporate and other assetsFuel
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
Key Operating Metrics | | | | | | 2024 | | 2023 |
Total retail fuel contribution ($ Millions) | | | | | | $ | 250.0 | | | $ | 264.7 | |
Total PS&W contribution ($ Millions) | | | | | | 6.7 | | | (50.1) | |
RINs (included in Other operating revenues on Consolidated Statements of Income) ($ Millions) | | | | | | 29.4 | | | 115.3 | |
Total fuel contribution ($ Millions) | | | | | | $ | 286.1 | | | $ | 329.9 | |
Retail fuel volume - chain (Million gal) | | | | | | 1,153.1 | | | 1,141.8 | |
Retail fuel volume - per store (K gal APSM)1 | | | | | | 230.1 | | | 230.2 | |
Retail fuel volume - per store (K gal SSS)2 | | | | | | 227.3 | | | 227.8 | |
Total fuel contribution (cpg) | | | | | | 24.8 | | | 28.9 | |
Retail fuel margin (cpg) | | | | | | 21.7 | | | 23.2 | |
PS&W including RINs contribution (cpg) | | | | | | 3.1 | | | 5.7 | |
1APSM metric includes all stores open through the date of calculation | | | | |
22023 amounts not revised for 2024 raze-and-rebuild activity |
The reconciliation of the total fuel contribution to the Consolidated Statements of Income is as follows:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
(Millions of dollars) | | | | | | 2024 | | 2023 |
Petroleum product sales | | | | | | $ | 3,811.7 | | | $ | 3,994.2 | |
Less Petroleum product cost of goods sold | | | | | | (3,556.1) | | | (3,780.6) | |
Plus RINs and other (included in Other Operating Revenues line) | | | | | | 30.5 | | | 116.3 | |
Total fuel contribution | | | | | | $ | 286.1 | | | $ | 329.9 | |
Merchandise
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
Key Operating Metrics | | | | | | 2024 | | 2023 |
Total merchandise contribution ($ Millions) | | | | | | $ | 191.6 | | | $ | 187.1 | |
Total merchandise sales ($ Millions) | | | | | | $ | 1,000.7 | | | $ | 966.2 | |
Total merchandise sales ($K SSS)1,2 | | | | | | $ | 195.0 | | | $ | 189.2 | |
Merchandise unit margin (%) | | | | | | 19.2 | % | | 19.4 | % |
Tobacco contribution ($K SSS)1,2 | | | | | | $ | 18.3 | | | $ | 17.5 | |
Non-tobacco contribution ($K SSS)1,2 | | | | | | $ | 19.5 | | | $ | 19.5 | |
Total merchandise contribution ($K SSS)1,2 | | | | | | $ | 37.8 | | | $ | 37.0 | |
12023 amounts not revised for 2024 raze-and-rebuild activity | | | | |
2Includes store-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points |
Same store sales information compared to APSM metrics | | | | | | | | | | | | | | | | | | |
| | | | Variance from prior year |
| | | | Three months ended |
| | | | March 31, 2024 |
| | | | | | SSS1 | | APSM2 |
Fuel gallons per month | | | | | | (0.9) | % | | (0.1) | % |
| | | | | | | | |
Merchandise sales | | | | | | 3.2 | % | | 3.1 | % |
Tobacco sales | | | | | | 6.6 | % | | 5.5 | % |
Non-tobacco sales | | | | | | (2.4 | %) | | (0.9 | %) |
| | | | | | | | |
Merchandise margin | | | | | | 2.2 | % | | 2.0 | % |
Tobacco margin | | | | | | 6.2 | % | | 4.1 | % |
Non-tobacco margin | | | | | | (1.3 | %) | | 0.2 | % |
1Includes store-level discounts for MDR redemptions and excludes change in value of unredeemed MDR points |
2Includes all MDR activity |
ThreeMonthsEnded September 30, 2017March 31, 2024 versus Three Months EndedSeptember 30, 2016March 31, 2023
After-tax results
Net income in the Marketing segment for Q1 2024 decreased $40.4 million, to $85.5 million when compared to the Q1 2023 period. The decrease was primarily due to lower total fuel contribution and increases in store operating expenses and SG&A expenses partially offset by higher fuel sales volumes and higher merchandise contribution.
Total fuel contribution for Q1 2024, was $286.1 million, a decrease of $43.8 million or 13.3%, compared to Q1 2023. This reduction was due to lower retail fuel contribution, combined with lower contribution from PS&W margins, and was partially offset by slightly higher fuel volumes sold in the period when compared to Q1 of 2023. Retail fuel margins on a cpg basis decreased 6.5% in Q1 2024 to 21.7 cpg, compared to 23.2 cpg in the prior year period. Total retail fuel volumes increased 1.0%, while fuel sales volumes on an SSS basis decreased 0.9% to 227.3 thousand gallons per store in Q1 2024 when compared to Q1 2023. Total product supply and wholesale contribution dollars, including RINs, decreased $29.1 million in Q1 2024 when compared to Q1 2023, primarily due to timing of transactions during the quarter and lower RIN sales volume, partially offset by the favorable impact of a rising price environment.
Total merchandise sales were $1.0 billion in both Q1 2024 and 2023. Total merchandise contribution in Q1 2024 improved 2.4% compared to Q1 2023 due to higher unit sales volumes and retail prices, up 0.5% and 1.9%, respectively. Total SSS merchandise contribution dollars grew 2.2%, which included an increase of 6.2% in tobacco products and a 1.3% decrease in non-tobacco products.
Store and other operating expenses increased $13.9 million in Q1 2024 compared to Q1 2023, primarily due to higher employee related expenses and maintenance costs at existing stores combined with net new store operating expenses. On an APSM basis, expenses applicable to store OPEX excluding payment fees and rent were 6.8% higher, primarily attributable to increased employee related expenses, maintenance, and property taxes.
SG&A expenses increased $3.1 million in Q1 2024 compared to Q1 2023, due primarily to higher salaries and related benefits, partially offset by lower professional fees.
Depreciation and amortization expense increased $2.5 million, or 4.8%, in Q1 2024 compared to Q1 2023 due to new larger store formats for Murphy USA stores and raze-and-rebuild activity in the quarter.
Corporate and Other Assets
ThreeMonthsEnded March 31, 2024 versus Three Months EndedMarch 31, 2023
Loss from continuing operations for Corporate and other assets decreased in the recently completed quarter, experiencing a loss of $7.9for Q1 2024 was $19.5 million, compared to a loss of $7.3$19.6 million in the third quarter of 2016. Interest expense was higherQ1 2023. Investment income in the current year quarter by $2.5was $0.4 million due primarily to the addition of the $300 million senior notes in the second quarter partiallyhigher but was offset by lower$0.5 million of slightly higher interest cost related to the term loan.expense.
NineMonthsEnded September 30, 2017 versus Nine Months EndedSeptember 30, 2016
After-tax results for Corporate and other assets improved in the recently completed quarter, experiencing a loss of $19.7 million compared to a loss of $20.9 million in 2016. This improvement was due to the 2017 period containing certain income tax benefits related to the adoption of ASU 2016-09 and discrete state tax refunds received. Interest expense was higher in the current period by $4.1 million due primarily to the addition of the $300 million senior notes in the second quarter 2017.
Non-GAAP Measures
The following table sets forth the Company’s EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2017March 31, 2024 and 2016.2023. EBITDA means net income (loss) plus net interest expense, plus income tax expense, depreciation and amortization, and Adjusted EBITDA adds back (i) other non-cash items (e.g., impairment of properties and accretion of asset retirement obligations) and (ii) other items that management does not consider to be meaningful in assessing our operating performance (e.g., (income) from discontinued operations, gain (loss)net settlement proceeds, (gain) loss on sale of assets, loss on early debt extinguishment, transaction and integration costs related to acquisition, and other non-operating expense (income) expense). EBITDA and Adjusted EBITDA are not measures that are prepared in accordance with U.S. generally accepted accounting principles (GAAP).
We use this Adjusted EBITDA in our operational and financial decision-making, believing that suchthe measure is useful to eliminate certain items in order to focus on what we deem to be a more reliable indicator of ongoing operating performance and our ability to generate cash flow from operations. Adjusted EBITDA is also used by many of our investors, research analysts, investment bankers, and lenders to assess our operating performance. We believe that the presentation of Adjusted EBITDA provides useful information to investors because it allows understanding of a key measure that we evaluate internally when making operating and strategic decisions, preparing our annual plan, and evaluating our overall performance. However, non-GAAP measures are not a substitute for GAAP disclosures, and EBITDA and Adjusted EBITDA may be prepared differently by us than by other companies using similarly titled non-GAAP measures.
The reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is as follows:
33 | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
(Millions of dollars) | | | | | | 2024 | | 2023 |
Net income | | | | | | $ | 66.0 | | | $ | 106.3 | |
| | | | | | | | |
Income tax expense (benefit) | | | | | | 15.9 | | | 32.7 | |
Interest expense, net of investment income | | | | | | 23.7 | | | 24.1 | |
Depreciation and amortization | | | | | | 58.7 | | | 56.4 | |
EBITDA | | | | | | 164.3 | | | 219.5 | |
| | | | | | | | |
| | | | | | | | |
Accretion of asset retirement obligations | | | | | | 0.8 | | | 0.8 | |
(Gain) loss on sale of assets | | | | | | (0.4) | | | 0.2 | |
| | | | | | | | |
| | | | | | | | |
Other nonoperating (income) expense | | | | | | (0.4) | | | (0.3) | |
Adjusted EBITDA | | | | | | $ | 164.3 | | | $ | 220.2 | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(Thousands of dollars) | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | |
Net income (loss) | $ | 67,887 |
| | $ | 45,491 |
| | $ | 120,424 |
| | $ | 177,675 |
|
| | | | | | | |
Income tax expense (benefit) | 40,789 |
| | 26,265 |
| | 68,389 |
| | 107,524 |
|
Interest expense, net of interest income | 12,260 |
| | 10,038 |
| | 33,037 |
| | 29,306 |
|
Depreciation and amortization | 28,989 |
| | 25,576 |
| | 83,514 |
| | 72,747 |
|
EBITDA | 149,925 |
|
| 107,370 |
|
| 305,364 |
|
| 387,252 |
|
|
| | | | | | | | | | | | | | | |
Accretion of asset retirement obligations | 447 |
| | 411 |
| | 1,335 |
| | 1,236 |
|
(Gain) loss on sale of assets | 58 |
| | 335 |
| | 3,426 |
| | (88,640 | ) |
Other nonoperating (income) expense | (3,034 | ) | | (2,848 | ) | | (3,269 | ) | | (2,966 | ) |
Adjusted EBITDA | $ | 147,396 |
| | $ | 105,268 |
| | $ | 306,856 |
| | $ | 296,882 |
|
Capital Resources and Liquidity
Significant Sources of Capital
As of March 31, 2024, we had $56.7 million of cash and cash equivalents and total marketable securities of $10.6 million. Our cash management policy provides that cash balances in excess of a certain threshold may be reinvested in certain types of low-risk investments. We continue to have acommitted$450 million asset based loan cash flow revolving credit facility (the “ABL"revolving facility”), of $350 million, which is subject to the remaining borrowing capacity of $295 millionwas undrawn at September 30, 2017 (whichMarch 31, 2024, which can be utilized for working capital and other general corporate purposes, including supporting our operating model as described herein)herein. Additional borrowing capacity under the revolving facility may be extended at our request and a $200 million term loan facility, as well as a $150 million incremental uncommitted facility. Aswith the consent of September 30, 2017, we had $97 million outstanding under our term loan and no amounts outstanding under our ABL. See “Debt – Credit Facilities” below for the calculation of our borrowing base. participating lenders.
We believe our short-termexisting cash on hand and long-term liquidityfuture borrowing capacity of our existing facilities is adequate to fund not only our operations, but also our anticipated near-term and long-term funding requirements, including capital spending programs, execution of announced share repurchase programs, potential dividend payments, repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies.
Operating Activities
Net cash provided by operating activities was $166$136.0 million for the nine three months ended September 30, 2017 March 31, 2024 and $210 was $149.7 million for the comparablesame period in 2016of 2023, a decrease of $13.7 million, or 9.2%. The decrease wasfor the three months ended March 31, 2024 is mainly due primarily to a decrease in net income of $40.3 million, an increase in inventories combined withthe amount of cash provided from changes in noncash working capital of $34.6 million, and lower deferred and noncurrent tax changes of $7.1 million partially offset by increased depreciation of $2.3 million compared to the same period in 2023.
For the three months ended March 31, 2024, operating cash provided by changes in non-cash operating working capital of $4.2 million was due to a decrease in inventory of $48.6 million due to higher merchandise prices and volumes, an increase of $16.3 million in income taxes payable due in part to phase-out of federal bonus depreciation resulting in higher current tax expense, and was partially offset by an increase in accounts receivable of $45.7 million due to the timing of receipts, a decrease in accounts payable. Net income decreased $57.3 and accrued liabilities of $9.3 million in 2017comparedwhich was related to the corresponding periodtiming of payments, and an increase in 2016 due to no repeat prepaid expenses of the gain on disposition of the CAM pipeline in 2016.$5.7 million.
Investing Activities
For the nine three months ended September 30, 2017, March 31, 2024, cash required by investing activities was $205$74.9 million compared to $74$69.0 million in 2016.2023. Thehigher $5.9 million increase in cash required by investing cash useactivities in 2024 compared to the current periodprior year was primarily due tohigher an increase of $3.5 million in capital expenditurespendingexpenditures due to the timing of projects and a reduction of $3.5 million in the current period to raze and rebuild retail locations whileamount of maturities of marketable securities, partially offset by net cash provided of $1.0 million from proceeds from the prior year period also contained sales proceeds and changes in restricted cash.sale of assets.
Financing Activities
Financing activities in the nine three monthsended September 30, 2017 provided March 31, 2024 required cash of $54$122.2 million compared to cash required of $31$39.1 million in the nine three monthsended September 30, 2016. Current period activity March 31, 2023, an increase of $83.1 million. The first three months of 2024 included issuing $300payments of $86.4 million of our 2027 Senior Notes compared to the 2016 period when cash was generated from the borrowing of a $200 million term loan. The current period also includedfor the repurchase of common shares, which was an increase of $152$72.7 million compared to repurchases of $13.7 million in the 2023 period. Amounts related to share-based compensation required $9.6 million more in cash during 2024 than in 2023. Dividend payments increased $0.7 million in 2024 compared to amounts paid in the first three months of 2023. Net repayments of debt required $3.9 million in 2024 compared to $3.8 million in 2023.
Dividends
During the three months ended March 31, 2024, the Company paid cash dividend payments of $0.42 per common share, for a total of $8.8 million, compared to the period ended March 31, 2023, in which dividends of $0.37 per common share were paid for total cash dividend payments of $8.1 million. As a part of our capital allocation strategy, the Company's intention is to deliver targeted double-digit growth in the per share dividend over time.
On May 9, 2024, the Board of Directors declared a quarterly cash dividend of $0.44 per common share, or $1.76 per share on an annualized basis. The dividend is payable on June 3, 2024, to shareholders of record as well as the repayment of $126 million of debt.May 20, 2024.
Share Repurchase Program
On January 25, 2016, the Company announced that itsMay 2, 2023, our Board of Directors authorized up to $500 million forapproved a share repurchase programauthorization of up to $1.5 billion. The authorization value excludes any excise tax that may be incurred. During the Company’s common stock along with fundingthree months ended March 31, 2024, a total of 216,036 shares were repurchased for new additional growth opportunities. Through the third quarter of 2017, the Company had purchased approximately $475$86.9 million, of its common shares under this current repurchase authorization with $152 million of this amount being acquired during the first nine months of 2017. The timing and number of shares repurchasedincluding excise tax under the program was determined by management at its discretion, and depended on a number of factors, including compliance with the terms of our outstanding indebtedness, results of our internal shareholder valuation model, general market and business conditions and applicable legal requirements. All purchases under this share repurchase program were funded through existing cash balances, operating cash flows, and other borrowings. We do not expect this repurchase program to negatively impact our ability to fund future development projects such as building new stores.
2023 program. As of September 30, 2017, there was $25 millionMarch 31, 2024, we had approximately $1.3 billion remaining under the previously authorized program. Upon completing the existing repurchase program, the Company may elect to repurchase additional shares utilizing existing available cash balances if prices are favorable in management's opinion.2023 authorization.
Debt
Our long-term debt at September 30, 2017March 31, 2024 and December 31, 2016 are2023 was as set forth below:
| | | | | | | | | | | | | | |
(Millions of dollars) | | March 31, 2024 | | December 31, 2023 |
5.625% senior notes due 2027 (net of unamortized discount of $1.2 at March 31, 2024 and $1.3 at December 31, 2023) | | $ | 298.8 | | | $ | 298.7 | |
4.75% senior notes due 2029 (net of unamortized discount of $3.4 at March 31, 2024 and $3.6 at December 31, 2023) | | 496.6 | | | 496.4 | |
| | | | |
3.75% senior notes due 2031 (net of unamortized discount of $4.3 at March 31, 2024 and $4.4 at December 31, 2023) | | 495.7 | | | 495.6 | |
Term loan due 2028 (effective interest rate of 7.21% at March 31, 2024 and 7.23% at December 31, 2023 and net of unamortized discount of $0.5 at March 31, 2024 and $0.6 at December 31, 2023) | | 388.5 | | | 389.4 | |
Capitalized lease obligations, autos and equipment, due through 2026 | | 3.7 | | | 3.1 | |
Capitalized lease obligations, buildings, due through 2059 | | 121.8 | | | 123.6 | |
Less unamortized debt issuance costs | | (6.7) | | | (7.1) | |
Total notes payable, net | | 1,798.4 | | | 1,799.7 | |
| | | | |
Less current maturities | | 15.3 | | | 15.0 | |
Total long-term debt, net of current | | $ | 1,783.1 | | | $ | 1,784.7 | |
|
| | | | | | | | |
(Thousands of dollars) | | September 30, 2017 | | December 31, 2016 |
6% senior notes due 2023 (net of unamortized discount of $5,174 at September 30, 2017 and $5,826 at December 2016) | | $ | 494,826 |
| | $ | 494,174 |
|
5.625% senior notes due 2027 (net of unamortized discount of $3,589 at September 30, 2017) | | 296,411 |
| | — |
|
Term loan due 2020 (effective rate of 3.86% at September 30, 2017) | | 97,000 |
| | 180,000 |
|
Capitalized lease obligations, vehicles, due through 2021 | | 1,959 |
| | 1,451 |
|
Less unamortized debt issuance costs | | (5,502 | ) | | (5,407 | ) |
Total notes payable, net | | 884,694 |
| | 670,218 |
|
Less current maturities | | 19,719 |
| | 40,596 |
|
Total long-term debt | | $ | 864,975 |
| | $ | 629,622 |
|
Senior Notes
On August 14, 2013, Murphy Oil USA, Inc., our primary operating subsidiary, issued 6.00% Senior Notes due 2023 (the “2023 Senior Notes”) in an aggregate principal amount of $500 million. The 2023 Senior Notes are fully and unconditionally guaranteed by Murphy USA, and are guaranteed by certain 100% owned subsidiaries that guarantee our credit facilities. The indenture governing the 2023 Senior Notes contains restrictive covenants that limit, among other things, the ability of Murphy USA, Murphy Oil USA, Inc. and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities.
On April 25, 2017, Murphy Oil USA, Inc. ("MOUSA"), our primary operating subsidiary, issued $300 million of 5.625% Senior Notes due 2027 (the "2027 Senior Notes") under its existing shelf registration statement. The 2027 Senior Notes are fully and unconditionally guaranteed by Murphy USA,the Company and are guaranteed by certain 100% ownedthe Company's subsidiaries that guarantee our credit facilities.Credit Facilities (as defined below). The indenture governing the 2027 Senior Notes contains
restrictive covenants that limit, among other things, the ability of the Company, MOUSA, and the restricted subsidiaries to incur additional indebtedness or liens, dispose of assets, make certain restricted payments or investments, enter into transactions with affiliates or merge with or into other entities.
On September 13, 2019, MOUSA, issued $500 million of 4.75% Senior Notes due 2029 (the “2029 Senior Notes”). The net proceeds from the issuance of the 2029 Senior Notes were used to fund, in part, the tender offer and redemption of a prior note issuance. The 2029 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities. The indenture governing the 2029 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 20232027 Senior Notes.
The 2023On January 29, 2021, MOUSA, issued $500 million of 3.75% Senior Notes due 2031 (the "2031 Senior Notes" and, together with the 2027 Senior Notes and the 2029 Senior Notes, the "Senior Notes"). The net proceeds from the issuance of the 2031 Senior Notes were used, in part, to fund the acquisition of QuickChek and other obligations related to that transaction. The 2031 Senior Notes are fully and unconditionally guaranteed by the Company and by the Company's subsidiaries that guarantee our Credit Facilities. The indenture governing the 2031 Senior Notes contains restrictive covenants that are essentially identical to the covenants for the 2027 and 2029 Senior Notes.
The Senior Notes and related guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the credit facilities)Credit Facilities) to the extent of the value of the assets securing such indebtedness. The 2023 and 2027 Senior Notes are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes.
Revolving Credit FacilitiesFacility and Term Loan
In March 2016, we amendedOur credit agreement consists of both a cash flow revolving credit facility and extended our existing credit agreement. a senior secured term loan.
The credit agreement provides for a committed $450 million ABL facility (with availability subject to the borrowing base described below) and a $200 millionsenior secured term loan facility. It also provides for a $150in an aggregate principal amount of $400 millionuncommitted incremental facility. On March 10, 2016,Murphy Oil USA, Inc. (the “Term Facility”) (which was borrowed $200 in full on January 29, 2021) and revolving credit commitments in an aggregate amount equal to $350 million under (the “Revolving Facility”, and together with the Term Facility, the “Credit Facilities”). The outstanding balance of the term loan facility that has a four-year term.was $389 million at March 31, 2024 and $390 million at December 31, 2023. The term loan is due January 2028, and we are required to make quarterly principal payments of $1 million, which began on July 1, 2021. As of September 30, 2017,March 31, 2024, we have zerohad no outstanding borrowings under our ABL facility.
The borrowing base is, at any timethe Revolving Facility and had $6.2 million in outstanding letters of determination,credit (which reduces the amount (net of reserves) equalavailable to the sum of:
• 100% of eligible cash at such time, plus
• 90% of eligible credit card receivables at such time, plus
• 90% of eligible investment grade accounts, plus
• 85% of eligible other accounts, plus
• 80% of eligible product supply/wholesale refined products inventory at such time, plus
• 75% of eligible retail refined products inventory at such time, plus
the lesser of (i) 70% of the average cost of eligible retail merchandise inventory at such time and (ii) 85% of the net orderly liquidation value of eligible retail merchandise inventory at such time.
The ABL facility includes a $200 million sublimit for the issuance of letters of credit. Letters of credit issuedborrow under the ABL facility reduce availability under the ABL facility.Revolving Facility).
Interest payable on the credit facilitiesTerm Facility is based on either:
•the London interbank offeredterm secured overnight financing rate, adjusted for statutory reserve requirementsplus the applicable Alternative Reference Rate Committee ("ARRC") recommended credit spread adjustment (the “Adjusted LIBOTerm SOFR Rate”);
or
•the Alternate Base Rate, which is defined as the highest of (a) the prime rate of interest last quoted by The Wall Street Journal as the "Prime Rate", (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from time to time plus 0.50% per annum and (c) the one-month Adjusted LIBOTerm SOFR Rate plus 1.00% per annum,
plus, (A) in the case of Adjusted LIBOTerm SOFR Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 1.50% to 2.00%a spread of 1.75% per annum dependingand (B) in the case of Alternate Base Rate borrowings, a spread of 0.75% per annum.
Interest payable on a total debt to EBITDA ratio under the ABL facility or (ii) with respect to Revolving Facility is based on either:
•the term loan facility, spreads rangingsecured overnight financing rate, plus a 0.10% credit spread adjustment for all interest periods (the "Adjusted SOFR Rate"), which is subject to a 0.0% floor;
or
•the Alternate Base Rate, which is defined as the highest of (a) the rate of interest last quoted by The Wall Street Journal as the "Prime Rate", (b) the greater of the federal funds effective rate and the overnight bank funding rate determined by the Federal Reserve Bank of New York from 2.50%time to 2.75%time plus 0.50% per annum and (c) the one-month Adjusted SOFR Rate plus 1.00% per annum,
plus, (A) in the case of Adjusted SOFR Rate borrowings, a spread of 1.75% to 2.25% per annum depending on a total debt to EBITDA ratio and (B) in the case of Alternate Base Rate borrowings, (i) with respect to the ABL facility, spreads ranging from 0.50%0.75% to 1.00% per annum depending on total debt to EBITDA ratio or (ii) with respect to the term loan facility, spreads ranging from 1.50% to 1.75%1.25% per annum depending on a total debt to EBITDA ratio.
The interestTerm Facility amortizes in quarterly installments, which commenced on July 1, 2021, at a rate period with respect to the Adjusted LIBO Rate interest rate option can be set at one, two, three, or six months as selected by us in accordance with the terms of the credit agreement.
We are obligated to make quarterly amortization payments on the outstanding principal amount of the term loan facility equal to 5% of the aggregate principal amount of term loans made on March 10, 2016, with the remaining balance payable on the scheduled maturity date of the term loan facility. Borrowings under the credit facilities are prepayable at our option without premium or penalty. We are1.00% per annum. Murphy USA is also required to prepay the term loan facilityTerm Facility with a portion of its excess cash flow, a portion of the net cash proceeds of certain asset sales orand casualty events subject(subject to certain exceptions.reinvestment rights) and the net cash proceeds of issuances of indebtedness not permitted under the Credit Agreement. The credit agreement also includes certain customary mandatory prepayment provisionsCredit Agreement allows Murphy USA to prepay, in whole or in part, the Term Facility outstanding thereunder, together with respect to the ABL facility.any accrued and unpaid interest, with prior notice but without premium or penalty other than breakage and redeployment costs.
The credit agreement contains certain covenants that limit, among other things, the ability of usthe Company and ourcertain of its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, to enter into consolidations, mergers or sales of material assets and other fundamental changes, to transact with affiliates, to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends, or to make certain accounting changes. In addition, theThe Revolving Facility credit agreement requires usalso impose total leverage ratio and secured net leverage ratio financial maintenance covenants which are tested quarterly. Pursuant to the total leverage ratio financial maintenance covenant, the Company must maintain a minimum fixed charge coveragetotal leverage ratio of a minimum of 1.0not more than 5.0 to 1.0 when availability for at least three consecutive business days is less than the greater of (a) 17.5% of the lesser of the aggregate ABL facility commitmentswith an ability in certain circumstances to temporarily increase that limit to 5.5 to 1.0 and the borrowing base and (b) $70,000,000 (including as of the most recent fiscal quarter end on the first date when availability is less than such amount), as well as a maximum secured total debt to EBITDAnet leverage ratio of 4.5not more than 3.75 to 1.0 at any time whenwith an ability in certain circumstances to temporarily increase that limit to 4.25 to 1.0. The Credit Agreement also contains customary events of default.
Pursuant to the term loans are outstanding. Ascredit agreement's covenant limiting certain restricted payments, certain payments in respect of September 30, 2017, our fixed charge coverage ratio was 0.63; however, we had more than $100 million of availability under the ABL facility at that date so the fixed charge coverage ratio currently has no impact on our operations or liquidity. Our secured debt to EBITDA ratio as of September 30, 2017 was 0.23 to 1.0.
The credit agreement contains restrictions on certain payments,equity interests, including dividends, when availability under the credit agreement is less than or equal to the greater of $100 millionand 25% of the lesser of the revolving commitments and the borrowing base and our fixed charge coveragetotal leverage ratio, is less than 1.0 to 1.0 (unless availability under the credit agreementcalculated on a pro forma basis, is greater than $100 million and 40% of the lesser of the revolving commitments and the borrowing base). As of September 30, 2017,3.0 to 1.0, could be limited. At March 31, 2024, our total leverage ratio was 1.76 to 1.0 which meant our ability at that date to make restricted payments was not limited. If our total leverage ratio, on a pro forma basis, exceeds 3.0 to 1.0, any restricted payments made following that time until the ratio is once again, on a pro forma basis, below 3.0 to 1.0 would be limited as our availability underby the borrowing base was more than $100covenant, which contains certain exceptions, including an ability to make restricted payments in cash in an aggregate amount not to exceed the greater of $113.6 million while our fixed charge coverage ratio under ouror 4.5% of consolidated net tangible assets over the life of the credit agreement was less than 1.0 to 1.0. As of December 31, 2016, we had a shortfall of approximately $304.1 million of our net income and retained earnings subject to such restrictions before the fixed charge coverage ratio under our credit agreement would exceed 1.0 to 1.0.agreement.
All obligations under the credit agreement are guaranteed by Murphy USA and the subsidiary guarantors party thereto, and all obligations under the credit agreement, including the guarantees of those obligations, are secured by certain assets of Murphy USA, Murphy Oil USA, Inc. and the guarantors party thereto.to the guarantee and collateral agreement in respect thereof.
Supplemental Guarantor Financial Information
The following is a description of the guarantees with respect to the Senior Notes and the Credit Facilities, for which MOUSA is primary obligor, and for which the Company and certain subsidiaries provide full and unconditional guarantees on a joint and several basis. See "—Debt" above for additional information concerning the Company's outstanding indebtedness, all of which is guaranteed as described below. See also Note 6 "Long Term Debt" in the accompanying consolidated financial statements.
The Senior Notes and related guarantees rank equally with all of our and the guarantors’ existing and future senior unsecured indebtedness and effectively junior to our and the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the Credit Facilities) to the extent of the value of the assets securing such indebtedness. The Senior Notes and related guarantees are structurally subordinated to all of the existing and future third-party liabilities, including trade payables, of our existing and future subsidiaries that do not guarantee the notes.
All obligations under the Credit Facilities are guaranteed by the Company and the same subsidiary guarantors that guarantee the Senior Notes. All obligations under the Credit Facilities, including the guarantees of those obligations, are secured by certain assets of the Company, MOUSA, and the other guarantors.
The combined assets, liabilities and results of operations of MOUSA and the guarantors are not materially different from corresponding amounts presented in the consolidated financial statements included herein. MOUSA is our primary operating subsidiary and generated the vast majority of our revenues for the three months ended March 31, 2024, and accounted for the vast majority of our total assets as of March 31, 2024. In the event MOUSA itself were unable to service the Company's consolidated debt obligations, our business and financial condition would be materially adversely impacted.
Capital Spending
Capital spending and investments in our Marketing segment relate primarily to the acquisition of land and the construction of new Company stations.stores. Our Marketing capital is also deployed to improve our existing sites,stores, which we refer to as sustainingmaintenance capital. We also use sustainingmaintenance capital in this business as needed to ensure reliability and continued performance of our sites.stores. We also invest in our Corporate and other assets segment. segment which is primarily technology related.
The following table outlines our capital spending and investments by segment for the three and ninemonth periods ended September 30, 2017 March 31, 2024 and 2016:2023:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
(Millions of dollars) | | | | | | 2024 | | 2023 |
Marketing: | | | | | | | | |
Company stores | | | | | | $ | 61.6 | | | $ | 52.2 | |
Terminals | | | | | | 0.9 | | | 1.2 | |
Maintenance capital | | | | | | 8.7 | | | 8.5 | |
Corporate and other assets | | | | | | 11.0 | | | 11.5 | |
| | | | | | | | |
Total | | | | | | $ | 82.2 | | | $ | 73.4 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(Thousands of dollars) | 2017 | | 2016 | | 2017 | | 2016 |
Marketing: | | | | | | | |
Company stores | $ | 53,783 |
| | $ | 63,294 |
| | $ | 152,466 |
| | $ | 150,290 |
|
Terminals | 1,063 |
| | 703 |
| | 1,731 |
| | 1,112 |
|
Sustaining capital | 8,658 |
| | 12,318 |
| | 28,583 |
| | 27,244 |
|
Corporate and other assets | 10,905 |
| | 6,349 |
| | 29,699 |
| | 15,221 |
|
Total | $ | 74,409 |
| | $ | 82,664 |
| | $ | 212,479 |
| | $ | 193,867 |
|
We currently expect capital expenditures for the full year 20172024 to range from approximately $250$400 millionto $300$450 million, including $205$275 million to $255millionfor the retail marketing business, $10$315 million for PS&W operations and $35retail growth, approximately $75 million to $80 million for Corporatemaintenance capital, with the remaining funds earmarked for other corporate investments and other assets including our Corporate initiatives which are intended to improve certain key systems and processes for the Company and the completion of the remodel of our Corporate headquarters. Also included in this total is approximately $26 million of maintenance capital for a continuation of our refresh program at 300 sites, along with increasing our supercooler installations to over 200 locations this year.strategic initiatives. See Note 1718 “Commitments” in the audited consolidated financial statements for the year endedDecember 31, 20162023 included in our Annual Report onForm 10-K.10-K for more information.
Critical Accounting Policies
There has been no material update to our critical accounting policies since our Annual Report on Form 10-K for the year endedDecember 31, 2016.2023. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in the Form 10-K.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain statements or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainties, including, but not limited to our M&A activity, anticipated store openings and associated capital expenditures, fuel margins, merchandise margins, sales of RINs, and trends in our operations.operations, dividends, and share repurchases. Such
statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: our ability to successfully expand our food and beverage offerings; our ability to continue to maintain a good business relationship with Walmart; successful execution of our growth strategy, including our ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with our newly planned stores which may be impacted by the financial health of third parties; our ability to effectively manage our inventory, manage disruptions in our supply chain and our ability to control costs; geopolitical events, such as Russia's invasion of Ukraine and the conflicts in the Middle East, that impact the supply and demand and price of crude oil; the impact of severe weather events, such as hurricanes, floods and earthquakes; the impact of a global health pandemic and any governmental response thereto; the impact of any systems failures, cybersecurity and/or security breaches of the company or its vendor partners, including any security breach that results in theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; successful execution of our information technology strategy; reduced demand for our products due to the implementation of more stringent fuel economy and greenhouse gas reduction requirements, or increasingly widespread adoption of electric vehicle technology; future tobacco or e-cigarette legislation and any other efforts that make purchasing tobacco products more costly or difficult could hurt our revenues and impact gross margins; efficient and proper allocation of our capital resources;resources, including the timing, declaration, amount and payment of any future dividends or levels of the Company's share repurchases, or management of operating cash; the market price of the Company's stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company's cash flows from operations, and general economic conditions; compliance with debt covenants; availability and cost of credit; and changes in interest rates. Our public filings,SEC reports, including our Annualmost recent annual Report on our Form 10-K for the year ended December 31, 2016 containsand quarterly report on Form 10-Q, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
We are exposed to market risks related to the volatility in the price of crude oil and refined products (primarily gasoline and diesel) used in our operations. These fluctuations can affect our revenues and purchases, as well as the cost of operating, investing and financing activities. We make limited use of derivative instruments to manage certain risks related to commodity prices. The use of derivative instruments for risk management is covered by operating policies and is closely monitored by our middle-office function and the Company’s senior management.
As described in Note7“Financial 10 “Financial Instruments and Risk Management” in the accompanying unauditedconsolidatedfinancial statements, there were short-term commodity derivative contracts in place at September 30, 2017 March 31, 2024 to hedge the purchase price of refined products. A 10% increase or decrease in the respective benchmark price of the commodities underlying these derivative contracts would havebeen immaterial to the Company. Changes in the fair value of these derivative contracts generally offset the changes in the value for an equivalent volume of these products.
Interest Rate Risk
We have exposure to interest rate risks related to volatility of our floating rate term loan of $389 million and to our Revolving Facility which currently is undrawn. Both of these loans are tied to the Adjusted Term SOFR Rate which can move in either direction and cause fluctuations in our interest expense recognized in any period and in our cash flows related to interest payments made. We make limited use of interest rate swaps to hedge a portion of our exposure to these rate movements. The acquisition of any interest rate derivatives is undertaken by senior management when appropriate with delegated authority from the appropriate Board level committee. A 10% increase or decrease in the interest rate would have an immaterial impact on the financial statements of the Company at March 31, 2024.
For additional information about our use of derivative instruments, see Note13 14 “Financial Instruments and Risk Management” inouraudited combined financial statements for the threeyear period endedDecember 31, 20162023 included in the Form 10-K and Note7 10 “Financial Instruments and Risk Management” in the accompanying unauditedconsolidatedfinancial statements for thenine three months ended September 30, 2017. March 31, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Our management has evaluated, with the participation ofour principal executiveand financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective and appropriately allowed for timely decisions regarding required disclosures as of September 30, 2017. March 31, 2024.
Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2017March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II –OTHER INFORMATION
PART II –OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
As of September 30, 2017,March 31, 2024, the Company was engaged in a number of legal proceedings, all of which the Company considers routine and incidental to its business. See Note 1114 ”Contingencies” in the accompanying consolidated financial statements. Based on information currently available to the Company, the ultimate resolution of environmental and legal matters referred to in this Item is not expected to have a material adverse effect on the Company’s net income, financial condition or liquidity in a future period.
Litigation
The Company was contacted byCity of Charleston, South Carolina, and the State of Mississippi to settle alleged violationsDelaware have filed lawsuits against energy companies, including the Company. These lawsuits allege damages as a result of climate change and the state's Petroleum Underground Storage Tank system requirements at several ofplaintiffs are seeking unspecified damages and abatement under various tort theories. For additional information about this litigation, see Note 14 ”Contingencies” in the Company's facilities. Based on discussions to date, the civil penalty is anticipated to be approximately $130,000. We are negotiating this matter with the state's Department of Environmental Quality in order to establish a consent agreement and resolve any allegations of non-compliance. We do not anticipate that the resolution of this matter will have a material impact on our results of operations oraccompanying consolidated financial condition.statements.
ITEM 1A.RISK FACTORS
Our business, results of operations, cash flows and financial condition involve various risks and uncertainties. These risk factors are discussed under the caption “Risk Factors” in our Annual Report on Form 10-K. We have not identified any additional risk factors not previously disclosed in the Form 10-K. 10-K and in the quarterly report on Form 10-Q for the period ended March 31, 2024.
ITEM 2.UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Below is detail of the Company’s purchases of its own equity securities during the period:
|
| | | | | | | | | | | | | | |
| | Issuer Purchases of Equity Securities |
| | | | | | Total Number | | Approximate |
| | | | | | of Shares | | Dollar Value of |
| | | | | | Purchased as | | Shares That May |
| | Total Number | | Average | | Part of Publicly | | Yet Be Purchased |
| | of Shares | | Price Paid | | Announced Plans | | Under the Plans |
Period Duration | | Purchased | | Per Share | | or Programs | | or Programs 1 |
July 1, 2017 to July 31, 2017 | | 110,200 |
| | $ | 72.96 |
| | 110,200 |
| | $ | 102,351,100 |
|
August 1, 2017 to August 31, 2017 | | 1,022,801 |
| | 67.86 |
| | 1,022,801 |
| | 32,945,029 |
|
September 1, 2017 to September 30, 2017 | | 125,596 |
| | 65.50 |
| | 125,596 |
| | 24,718,780 |
|
Three Months Ended September 30, 2017 | | 1,258,597 |
| | $ | 68.07 |
| | 1,258,597 |
| | $ | 24,718,780 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Issuer Purchases of Equity Securities |
| | | | | | Total Number | | Approximate |
| | | | | | of Shares | | Dollar Value of |
| | | | | | Purchased as | | Shares That May |
| | Total Number | | Average | | Part of Publicly | | Yet Be Purchased |
| | of Shares | | Price Paid | | Announced Plans | | Under the Plans |
Period Duration | | Purchased | | Per Share | | or Programs | | or Programs 1 |
January 1, 2024 to January 31, 2024 | | 30,473 | | | $ | 353.41 | | | 30,473 | | | $ | 1,369,739,218 | |
February 1, 2024 to February 29, 2024 | | 34,619 | | | 379.62 | | | 34,619 | | | 1,356,597,234 | |
March 1, 2024 to March 31, 2024 | | 150,944 | | | 413.97 | | | 150,944 | | | 1,294,111,467 | |
Three Months Ended March 31, 2024 | | 216,036 | | | $ | 399.92 | | | 216,036 | | | $ | 1,294,111,467 | |
1Terms of the repurchase plan authorized by the Murphy USA Inc. Board of Directors and announced on January 25, 2016May 2, 2023 include authorization for the Company to acquire up to $500 million$1.5 billion of its common shares by December 31, 2017. Upon completing the existing repurchase program, the Company may elect to repurchase additional shares utilizing existing available cash balances if prices are favorable in management's opinion.2028, and does not include excise tax on stock repurchases.
ITEM 5. OTHER INFORMATION
None.
None
ITEM 6.EXHIBITS
The Exhibit Index on page 4241 of this Form 10-Q report lists the exhibits that are filed herewith or incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
MURPHY USA INC. | |
(Registrant) | | |
| | |
By | /s/ Donald R. Smith Jr | |
| Donald R. Smith Jr., Vice President, | |
| Chief Accounting Officer and Treasurer |
| | |
(Registrant)
By /s/ Donald R. Smith Jr. __________
Donald R. Smith Jr., Vice President
and Controller (Chief Accounting Officer
and Duly Authorized Officer)
November 2, 2017
May 9, 2024
| | | | | |
| |
| |
EXHIBIT INDEX |
Exhibit Number | Description |
| |
4.131.1* | |
12* | |
31.1* | |
31.2* | |
32.1* | |
32.2* | |
101. INS*INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101. SCH* | Inline XBRL Taxonomy Extension Schema Document |
101. CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101. DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101. LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document |
101. PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase |
104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
* Filed herewith.